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No/Low Deposit Home Loans

No/Low Deposit Home Loans

Can I buy a property with less than a 20% deposit?

A mortgage loan with a deposit of less than 20% is referred to as a low deposit home loan. Fortunately for many clients, lenders have created a variety of products that allow you to reach the property market even though you have a small deposit. we will explore the ramifications of both and decide the best product for you, whether you are starting with a 3% deposit or have been gifted a deposit.

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Getting ready to purchase your new home can be an incredibly thrilling experience. However, it is often overshadowed by the need to pay a 20% down payment, which is the standard home deposit in Australia. This requirement is often considered a huge challenge by many first home buyers and is what drives them away from the market and away from even starting with their journey towards homeownership.

If you are not yet in the position to pay a 20% down payment, know that there are still other options available for you to buy your dream home. There are loans that require a low or zero deposit, but you should be aware of the terms that come along with them. There are pros and cons, and it is vital that you understand them fully.

This is where a Lendstreet mortgage broker comes in. We are here to educate you on the potential benefits and even risks of these low or no deposit home loans. We will be with you to review mortgage products by different lenders and find the one that best suits your funding requirement, your financial capacity, and your preference.

Low and No Deposit Home Loans: What will be different?

The biggest difference between normal loans and low or no deposit home loans is that the lender will very likely request that you get and pay for lenders’ mortgage insurance (LMI). This is always a requirement when purchasing a property with a loan that will cover over 80% of the property’s value. The Lenders Mortgage Insurance will, in the long-run mean that you will pay more for your home than what you would have paid under a regular home loan.

The rates of your LMI are variable, and they often depend on the cost of the property you are purchasing. Having an experienced mortgage broker by your side while negotiating your loan, and especially one that specialises in low and no deposit home loans will mean that you may be able to benefit from a competitive rate for your mortgage insurance.

If you want to potentially avoid getting mortgage insurance for your property, it may be worth looking into what your state has to offer in terms of grants and schemes. These will vary depending on whether this is your first home or not. However, it is still worth doing your research and asking your mortgage broker about available government incentive programs for aspiring home buyers.

Using the First Home Owner Grant as part of your deposit.

The First Home Owner Grant (FHOG) is one of the most popular schemes for first home buyers. Normally, those eligible and qualified will receive $10,000 that they can use towards the purchase of their new home. In most cases, that amount will not be enough to cover your entire deposit, but it can help bring the percentage of the house that you can cover with the deposit up. In turn, this could mean that you will be able to get better terms for your low deposit home loan.

A solicitor or a licensed conveyancer will be able to assist you with the application process of the FHOG assistance scheme, but getting advice from a mortgage broker first can give you additional leverage in terms of the requirements involved and making sure that the move aligns perfectly with your desired home loan.

Using superannuation as part of your deposit.

Much like the First Home Owner Grant assistance scheme, the First Home Super Saver Scheme (FHSS) is also only available to first home buyers. The FHSS is not a scheme that provides first home buyers with an extra amount. Instead, it is a scheme designed to help save up for a deposit by making voluntary contributions to your super. These contributions can then be withdrawn to form part of your deposit. However, as your super is normally not meant to be accessed until retirement, accessing it early does come with a set of terms that you will need to follow.

This scheme is particularly helpful to those who are missing part of their deposit but have been actively contributing to their super for years. Depending on the amount that you can take out, you could even be able to gather the entire 20% deposit that is typically requested.

Why is your deposit so important?

Most lenders associate your ability to save with your ability to pay. As such, seeing a 20% deposit gives them the confidence to assume that you will be making all of your payments in time. Still, even if you do not manage to gather the entire deposit, there are ways to get a lender to provide you with a home loan. Therefore, even without the 20%, your future home may be closer than you think.

Talk to us if you want to know more about low or no deposit home loans. Please leave your details using this form, and we will be in touch right away to begin exploring your options.

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