Buying A Home With No Money Down

2012 April 10
by admin

Couple with a no deposit mortgageBuying a home is a costly undertaking isn’t it? Not only do you have the monthly loan repayments to consider, but you also need a large deposit upfront. Surprisingly, this isn’t always the case!

Depending on your situation, there are a number of ways you can waive most, if not all of this initial outlay. These range from guarantor loans through to using a credit card to pay for the deposit.

Who applies for no deposit mortgages in Australia?

In Australia, applications for no deposit home loans are mainly for owner occupied houses from previous home owners and first home buyers. In the majority of cases they are doing this with the help of a guarantor.

Who can be a guarantor?

A guarantor will usually be the buyer’s parents, a family member, or in rare cases, a friend. They guarantee your loan using their own property, perhaps putting a second mortgage on their home. They may also use other assets such as a term deposit.

A guarantor loan benefits the borrow in a number of ways:

  • They do not need to wait save up a deposit before they purchase – great for first home buyers
  • Lenders Mortgage Insurance (LMI) is not required as the guarantor is security for it as well as the loan
  • In some cases it is possible to borrow for stamp duty and conveyancing costs as well as 100% of the property value

What criteria must be met to qualify for a no deposit home loan?

Most importantly, you must have a perfect credit rating and pay all your debts such as rent and loans on time. Lenders will not make exceptions to your credit rating If LMI is required, which it is for all loans at 80% and above of the property value.

You must be able to service your loan! Remember to only apply for what you can afford. A bank will not approve an application in which you are borrowing right to the limit of what you can afford. This is because a small interest rate increase or change in your financial situation may cause you to default and lenders are not willing to take on that much risk.

For no deposit home loans, where you are buying is important, as is stable income and employment. However, if you are in a very good financial position banks and lenders may make exceptions on income and employment stability.

How can I use my credit card to purchase a home

This is a far more unusual route to a no deposit home loan and it also comes with far more limitations than a guarantor loan. Only a very small number of lenders offers this type of loan and that number may have lowered even further down to one.

This one lender offers a 95% loan and a credit card with a limit up to $20 000. The credit card has the same interest rate as loan and therefore gives the borrower the ability to borrow 100% of the value of a property up to $400 000. To be eligible you must be able to prove you have saved up or held 5% of the purchase price in an account for at least three months prior to your application.

Where can I find out more?

To find out more about buying a home with no money down, read this page about no deposit home loans. The page is on our primary website, the Home Loan Experts. At the Home Loan Experts you can find out much more about mortgages and apply with a company who works with over 40 different lenders to find the best value for you.

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