Low Deposit Home Loans
You can still get a home loan with a small or low deposit.
What's important with Low Deposit loans is that you have a guarantor and can demonstrate your financially responsible. Often times, there's some negotiation with the lender too. It's important to make sure you have all the facts before you sign up for a low deposit loan.
What you need to know about low deposit loans.
Genuine Savings - Lenders classify the money you've saved into two categories - genuine and non-genuine savings. Lenders want to see that your deposit, big or small, has been genuinely saved. This means you can show evidence of regular savings over a defined period, generally 3 months. If the money you have for a deposit hasn't been genuinely saved, there are still options and should seek the help of a mortgage broker.
Guarantors - With a low deposit, or even a medium sized deposit, you can use a guarantor to help secure a home loan and avoid additional costs such as Lenders Mortgage Insurance (LMI). In most cases a guarantor will have to be a family member with a certain level of equity in an existing property. However lenders all have varying policies for Guarantors and a mortgage broker can talk to you about the ones that match your personal circumstances.
Loan-to-Value Ratio (LVR) - Low deposit home loans typically allow you to borrow up to 95% of the property value. If you don't have enough of a deposit for a 95% LVR, you will need a guarantor or to look at alternative lending solutions with a mortgage broker.
How a mortgage broker can help you compare low deposit loans.
Low deposit loans can be difficult to both compare and understand the costs involved. Other times buyers will see their savings eroded by the costs to purchase a property and to establish a loan. A mortgage broker will walk you through all the costs involved and make sure your budget and financial goals match the loan you've selected. A mortgage broker also knows the in's and out's of using a guarantor. A mortgage broker can also negotiate with the lender to best use the savings you have and will have in the future.
To be considered for a low deposit home loan, you will need the following:
- good credit history
- a guarantor in some cases
- current employment
- good savings pattern
- controlled debts.
If you're taking out a low deposit loan, be prepared to pay Lenders Mortgage Insurance (LMI). LMI protects lenders in case you falter on your repayments. This is a substantial 2% of the value of the property. Other fees to consider include legal fees and stamp duty.