How can I borrow with a small deposit?
A conventional mortgage
You’re going to need a broker for this one! Some banks allow smaller deposits than others and some charge a Low Deposit Premium to compensate themselves for the added risk of accepting your small deposit.
At LoanMarket Townsville, we can help you to identify the best deal for you from a suite of low deposit products on offer.
That’s if you choose to go with a bank or finance company mortgage from the start.
Vendor finance may offer you a different opportunity to buy with a low deposit. There are a few kinds:
Installment Sales work like conventional mortgages except that the seller of the property lends you the money instead of a bank or finance company. You pay a deposit – and you may be able to negotiate a small one – then move straight in. You pay off the debt in installments over time – just like with any other mortgage - and an extra fee to the vendor to cover rates and some bills.
Rent to Own or Rent to Buy gives you the opportunity to move in straight away by paying just a rental bond. Then you pay rent plus an extra amount which goes towards buying the property. Once you have bought 10% to 20% of the property, you can contact a broker, like us at LoanMarket Townsville, to find you a conventional mortgage. You will also be able to demonstrate that you can pay off the loan by showing the bank the transaction records of your rent-to-buy payments.
Deposit Finance gives you the opportunity to pay what you can towards the deposit and borrow the rest from the seller, topping up your deposit to the 10% or 20% required for a conventional mortgage. You’ll have two mortgages on the property until the deposit loan is paid off.
With each of these options, the seller may retain title, or protect their interest with a caveat on the title, until you pay off your debt. This adds a little extra risk for you.
You should talk to a broker like us, at Loan Market, Townsville, if you are considering any of these arrangements because we can help you to judge whether you are getting a good deal or not.
Form a syndicate
This is both and old, and a new strategy. Old, because people have been clubbing together to buy property ever since property became a thing you could buy and sell. New, because websites are appearing, which streamline the process by matching potential investors with syndicates.
You can team up with people to invest in the property, and approach the syndicate to become the tenant. It won’t feel quite like your own home because you’ll be paying rent to the syndicate, but at least you’ll own some of it.
Remember, you have options
Most importantly, don’t despair. Ultimately, vendors are there to sell you property and lenders are there to lend you money. If you can present a convincing enough proposal to them, you can make it happen. Talk to us at LoanMarket Townsville about your options.
Call me, Rob McDougall, to make it happen - Ring me now on 0411 417 467