07 May Buying a House With No Deposit
As median house prices across the East Coast of Australia have seen huge price gains over the last decade, it has become more challenging for first-home buyers to get into the market.
With the high cost of living in cities like Melbourne, it is harder than ever to try and save up the deposit for a home loan and that’s one of the reasons many people never started.
Fortunately, if you speak to a residential mortgage broker in Melbourne, there is every chance, they will be able to find a way for you to buy that property – even if you have no deposit.
When you’re looking at a loan with little to no deposit, there will be, of course, a few other requirements that you’ll have to meet. But a residential mortgage broker in Melbourne is the first place you should start as they have access to a broad range of lenders who can find something to suit your personal situation.
Guarantor Home Loans
If you’re a first home buyer, looking to get into the housing market then one of the most effective ways is to use a guarantor to help you get started.
For the most part, this is going to be your parents and they are able to generally offer up equity in their own home to help give you the leg up you might need to get that first property. Once you’ve paid off the guaranteed portion of the loan or your property has appreciated in value by that amount, you can then apply to remove the guarantee. But for getting into your first property quickly, a guarantor loan is a great option.
Your residential mortgage broker in Melbourne will be able to help you identify a lender that will likely be able to lend up to 105% of the purchase price.
What that means is that the entire cost of the house is recovered by the loan, as well as the additional closing costs such as stamp duty. A guarantor home loan is a great way for you to quickly get yourself into your own home, or even get an investment property.
This type of loan is also great for a number of other reasons as well.
Firstly, it will allow you to save money by not paying an LMI premium. Lenders mortgage insurance (LMI) is generally applicable to loans where the LVR (loan to value ratio) is greater than 80%. LMI is an ongoing cost that can be in the thousands of dollars every year.
By using a guarantor loan, this will eliminate the need for LMI, as the lender is using the guarantee from someone, like your parents, to help cover the equity shortfall.
You also have the ability to roll some of your other high-interest loans, into these loans as well, saving you a significant portion of money every month. Things like credit card or car loans are great, but they end up costing you a lot in the long-run. So it’s well worth speaking to a residential mortgage broker in Melbourne about this prior to getting started.
Servicing the Loan
While you might be to access a guarantor home loan, you’re still going to have to be able to actually service the loan that you take out.
At the end of the day, if you can’t meet those monthly payments, the guarantor is also on the line here. That said, they will only be liable for the portion of the home that they are guaranteeing – likely 20%.
That’s why if you do have some savings and show a track record of being able to save to build that deposit, it is going to give a lender far more confidence.
And while your residential mortgage broker in Melbourne will be able to help if you don’t have any savings, you will really be able to open up your options for a home loan if you put a plan in place to save that 5%.
Government Incentives
If you’re in the market for a home loan in Melbourne, the good thing is you also have a number of other Government incentive programs that you might be able to access that you could use as a deposit.
The First Home Super Saver Scheme (FHSS) lets you use additional super contributions to finance your first home. In a way, this is the same as saving for a deposit.
At the same time, first home buyers will have access to the First Home Owner’s Grant (FHOG). However, it is unlikely that it would be enough to cover the full deposit costs, but it could help with things like stamp duty.
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