The past few years has seen true no deposit 100% home loans become unavailable thanks partly to the global financial crisis and changes in banks’ lending criteria. For a home loan most lenders require a deposit of at least five per cent of a property’s purchase price, but there could be an alternative. Do you want to buy a home but don’t yet have a deposit behind you?
Low Deposit Home Loans
A low deposit home loan is the first alternative; this is in the region of a 5% deposit. Many lenders will now allow up to 95% of the property to be borrowed, however the 5% must be genuine savings and not a lump sum i.e. tax offsets, inheritance etc. This can be a great start for an individual looking to get their first property; low deposit home loans can be quite flexible and tailored to suit your needs.
Guarantor Home Loan
Another option is a guarantor home loan. This involves the support of your parents or another third-party who already owns property and is prepared to guarantee your loan. As guarantors, their property is used as collateral against your loan, so this is a responsibility that should be carefully considered.
Some lenders allow the guarantor to choose how much of the loan – up to 100 % – will be secured against the property, but 20% is often considered the standard amount. A guarantor home loan can be a great option if you are a first home buyer who has the income to manage your home loan repayments but not yet enough for a deposit.
Many lenders offer some kind of guarantor home loan, though the terms and structure may differ from lender to lender.