No Deposit Home Loans
No and low deposit home loans were introduced into the home loan market to assist buyers with the income to service but not the necessary deposit to secure a traditional home loan.
No deposit or low deposit home loans allow you to purchase property with little or no deposit. In many cases you will be able to capitalise Lenders’ Mortgage Insurance (LMI) onto your loan balance to avoid having to pay this cost upfront; your Loan Market mortgage broker will arrange this for you during the loan application process. Genuine no deposit, 100% home loans which cover the full purchase price of the property are unavailable in the current economic climate.
Low deposit home loans, which are still available, are particularly useful for first home buyers, especially when used in conjunction with the First Home Owners’ Grant and generous state-based incentives in NT, NSW, QLD, SA, TAS, VIC and WA. Low deposit options exist for people with a deposit of less than 20 per cent.
Lenders will require proof of a good income before considering you for a low or no deposit home loan, and may apply stricter assessment criteria and higher interest rates to the loan. Your Loan Market mortgage broker knows the assessment criteria you are required to meet and will package your application to best address this.
No deposit and low deposit home loan assessment criteria
If you are interested in getting a low deposit home loan and would like to know more about the assessment criteria or to talk to a Loan Market mortgage broker about the home finance options that are in your best interest, call us on 13 LOAN (or direct on +61 2 9249 3739) or email us the form on this page and we will contact you within 2 business hours.
100% home loan – no deposit
A true 100% or no deposit home loan will cover the entire purchase cost of the property, but these are unavailable in the current economic climate. When available, you will still need to finance any associated costs and Lenders Mortgage Insurance (LMI). In practice, a number of lenders will finance approximately 97% of the purchase price of the property, with the remaining 3% allocated to your LMI costs, leaving you to put together a small deposit.
Lenders often base their decision on eligibility for a 97%/100% home loan on where you live as well as your ability to meet the repayments, so it’s important to discuss your preferred purchase locations with your mortgage broker. The interest rate may be slightly higher.
90-95% home loan – low deposit
Home loans totalling around 90-95% of a property’s value are about the maximum a lender will allow a property purchaser to borrow. Often borrowers also capitalise their Lenders’ Mortgage Insurance costs into the loan. For the most commonly available option, this will take the overall borrowings to around 92%. You will need to provide a small deposit, which includes 3-5% genuine savings, and also have funds to cover associated costs.
A recent development in low deposit home loans has seen the return of 95% loans that do not require genuine savings. Your 5% deposit may instead come from a range of approved sources including statutory gifts, grants, tax refunds, sale of assets or an inheritance. There are strict terms and conditions that do apply to these types of home loans so talk to your mortgage broker to determine your eligibility and the suitability of a 95% home loan for your circumstances.
Loans to cover associated costs
Some lenders may also consider you for a personal loan in addition to a low deposit loan, to allow you to borrow some or all of the additional costs associated with your property purchase, such as stamp duty and conveyancing fees. You will need to discuss this option with your local mortgage broker.
Additional options for low deposit holders
If you do not qualify for a low deposit home loan from some reason, for example you do not have the genuine savings required, you may still be able to secure a home loan. Talk to your mortgage broker about family equity home loans and other options that are available to you.
Increase your deposit
Whilst a low deposit home loan can be suitable, it’s always a good idea to put together as much of a deposit as you can, to minimise costs and give you more room to negotiate on interest rates. Put together a basic savings plan using the savings calculator to increase your deposit amount.
Secure a low deposit home loan
To organise finance for your property purchase with a small deposit, or to discuss the home loan that is in your best interest, talk to your local Loan Market mortgage broker, or call us at any time on 13 LOAN or direct on +61 2 9249 3739.
