Finding No Deposit Home Loans in Australia
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When you're buying your first home or starting a family and need a bigger place, trying to save for a 20% deposit on your home loan can be a struggle.
Some banks might only require a 10% deposit, with select Lender sometimes offering a minimum deposit of 5%. However, a 20% deposit is generally needed to avoid paying the Lender's Mortgage Insurance (LMI). Some financial institutions might offer a no deposit home loan when you meet certain conditions, for example, having a guarantor.
Take note: ComparingExpert and consultants are not mortgage brokers. The information provided in this article is to help you make an informed decision. Please contact your home loan provider or financial institution for advice and guidance.
Can you buy a house with no deposit?
There are ways you can buy a home with little to no deposit. If you're a first-time homebuyer, select Lenders might borrow you 90% to 95% of the property value. A zero-deposit home loan could be considered if you have a guarantor. A guarantor is usually an immediate family member that offers the equity in their home as security for your loan.
How much can you borrow for a home loan?
While the minimum deposit for many Lenders is usually 10%, a 20% deposit is recommended by most banks and financial institutions. Borrowing more than 80% usually poses a higher risk for the Lender and may attract additional costs like Lenders Mortgage Insurance and higher interest rates.
What is the minimum deposit for a house in Australia?
Most Lenders require you to pay a deposit between 5% and 20% of the purchase price of your property. A low deposit home loan is when your Lender requires less than the recommended 20%, for example, you can borrow up to 95%. Typically, when you borrow more than 80% of the property value, you must pay Lenders Mortgage Insurance (LMI).
What is Lenders Mortgage Insurance?
LMI protects the Lender if you are unable to make repayment; it is an upfront cost that you can generally decide to pay upfront or have it added to your home loan amount. Lenders Mortgage Insurance is usually calculated on the amount you're borrowing and the deposit you've managed to save. However, LMI's differ between financial institution lending you the money and the insurance provider they use.
5 Ways to get a home loan without a deposit
Most Lenders require proof that you saved a certain amount of money to put toward your deposit. This is called genuine savings and shows the Lender that you are responsible with your money. Below are some of the ways you can get a home loan without a deposit.
More tips to help you qualify for a minimum deposit mortgage
- Show genuine saving by providing the Lender with at least three months worth of bank and savings account statement,
- Have a stable and high enough income to prove you can afford repayments,
- Clear any personal debts and show that all outstanding payments have been made on time,
- Lower your credit card limits,
- Check your credit score. Borrowers should have a high credit rating.
Dangers of a zero or minimum deposit on a house
Although a 100 percent mortgage loan may allow you to buy your dream home sooner, there are risks you need to consider, including:
- Generally, much higher interest rates,
- Additional fees and charges might apply,
- Lender's Mortgage Insurance needs to be paid when borrowing more than 80% of the property purchase price,
- Restrictions on where you can buy property in Australia,
- Longer approval time as the application process might be more complicated.
Frequently asked questions and answers
Lenders might consider giving you a home loan if you can meet specific criteria, for example:
- Proof you can comfortably make monthly repayments,
- Have a good credit score,
- Use a guarantor or qualify for a first home owners grant,
- Show suitable amount of savings for a deposit.
By applying for an equity loan and meeting certain criteria, you might be able to qualify to buy a second home with no deposit. You might need to show proof that you can afford to pay two mortgages at once and have an excellent credit score.
Yes, generally a guarantor needs to be able to prove that they are financially stable enough to help you pay your home loan. Typically, a credit check is conducted as proof of this. They might also need to meet additional credit criteria, depending on the size of your loan and your Lender.
Yes, generally if you have paid off more than 20% of your existing mortgage, you might be eligible for this option. However, a poor credit score could count against you.
It is doubtful that you'll be able to get a 100% deposit home loan when you work for yourself. However, a Lender might consider increasing your borrowing amount if you can show that you have been self-employed for at least two years and provide them with tax returns and proof of a stable income. The Lender could also request proof of income from your previous employer to help you prove your income stability.
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