13 May No Deposit Home Loan – its Advantages and Disadvantages
No deposit home loans are exactly as the name suggests; it means you can borrow 100% of the purchase price of your dream property. However, no deposit home loans are extremely difficult to obtain lately. After the global financial crisis, there were a lot of changes with regards to lending policies and most lenders have withdrawn 100% home loans which have been viewed as high risk type of lend. The best most of the home loan lenders can do, is offer low deposit home loans of up to 95% of the purchase price.
As a first home buyer with limited cash, how can you get a 100% no deposit home loan?
With house prices rising so much and the associated costs of stamp duty eroding people’s savings borrowers are finding alternative ways to find the funds
1. Guarantor loan ; A guarantor loan is a very effective way to borrow 100% of the purchase price while incurring minimal risk for the guarantor. Many banks offer this product under various monikers =- guarantor loan, family guarantee, family pledge.
2. Personal loan ; If you have a high income that can service two loans at a go, then this option can work for you. All you need is a little creativity. One option to get it to work is to take a personal loan, pay it off and use the loan amount as deposit for your home loan which you can later refinance.
3. Using first home owners grant as deposit ; if you are buying a property that is low priced or buying with a partner, you may use the FHOG as a deposit for your home. Please note that some lenders may still want to see some evidence of your savings ability.
- The big winner for the no deposit home loan is that you can move out of your parents house to your dream home sooner.
- No deposit home loans have the same features as other home loan options such as the ability to make additional repayments and redraw facilities.
- Another advantage of having a no deposit home loan is the fact that you are able to save on LMI as the guarantor allows you to borrow with a high loan-to-value ratio (LVR) mostly above 80%.
- The standards for lending the no deposit home loans are very stringent with the process being too lengthy compared to the traditional mortgage options. With your financial accounts thoroughly scrutinized to be able to qualify, you need to make sure you are in a position to meet them all as this is not an easy loan to get.
- Some lenders impose restrictions making it difficult for self employed borrowers and those on a low income to get approved. With a no deposit home loan you may also be restricted as to which post codes you can buy in.
Click on the link to know more about the working of a no deposit home loan.