If you want to buy a home but haven’t been able to save much of a deposit, you may find it more difficult to get a home loan, but where there’s a will, there’s a way. Here are some of Choice Home Loans’ no deposit loans and low deposit loan options for the savings-challenged:
1. A guarantor home loan
A guarantor home loan may be the easiest way for borrowers whose parents already own a property to get a zero deposit home loan. A guarantor home loan means the bank holds the guarantor’s property as extra security if you default on your loan – because of this, they may be willing to grant you a loan without any proof of a deposit. Unlike low deposit home loan options, a guarantor option may also mean that you will not have to pay lender’s mortgage insurance.
However, you will also need to consider whether your parents are in the position to provide security to your loan, and the added financial strain this could cause them. In addition, the fact that you have no savings of your own means there is a greater risk you will not be able to pay back the loan, so you will usually pay a higher interest rate if you get a guarantor home loan.
2. Using your own property as security
Using your own property as security is a good way to go if you already own a home, and want to get into the investment property market, but can’t save enough for a second home deposit. Again, because the bank has a solid asset at their disposal if you don’t pay back your loan, they may be happy to grant you a no deposit home loan for your second property. Again though, you will need to watch out for high interest rates with these types of loans.
3. Low deposit home loans
Low deposit home lonas are a good option for those who can get hold of a 5-10% deposit as a one-off cash windfall – for instance, a gift from mum and dad or an inheritance. You can use this plus proof of your income and expenses (including an assessment of your assets and any liabilities) you may have to show that you can manage money well enough to pay your loan. However, you will have to pay a lender’s mortgage insurance premium on top of your initial amount. Lenders usually require this for loans of 10% deposit or less so they are protected in the event you default on your loan.
If you want to find out more about your options if you have little or no deposit for a home loan, you can visit one of Choice Home Loans’ mortgage brokers to find out more. A Choice Home Loans broker will be able to provide detailed advice on your situation, and present you with the best and most competitive product options. Make an enquiry online to speak to one of our knowledgeable and experienced mortgage brokers today.
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