Understand the important features of loans for First Home Buyers
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Since the global financial crisis, lending policies have tightened up, with no-deposit home loans no longer available. Most mortgage lenders will require you to have saved at least five per cent of the purchase price over a period of at least three months.
There is, however, an alternative option that can enable you to buy a home without a deposit.
A guarantor home loan 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 per cent is often considered the standard amount. While other third parties may be able to act as your guarantor, many lenders only allow parental guarantees. Lenders may also require those guarantors to seek independent legal advice before signing a guarantee.
Although a guarantor home loan may enable you to borrow the entire purchase price of your new home, it’s important to remember you may still need to cover fees and charges associated with the purchase, such as stamp duty, yourself.
You may even be able secure a guarantor loan of more than 100 per cent to help cover these costs, though this is not common. 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.
But you don’t have to be a first home buyer to get a 100 % home loan with a guarantor. Even if you’ve owned a home in the past you may still qualify to buy a home with no deposit.
Contact a Choice Home Loans broker now.
What if you don’t have a guarantor? Click here for our top tips on saving for a deposit.