Understand the important features of loans for First Home Buyers
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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?
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.
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. Your mortgage broker will be familiar with the range of loans available and will be able to help you find a product that works for you.