No Deposit Home Loans do they exist?
No Deposit Home Loans may still be available for limited circumstances. Typically you can still fund the purchase of your home with no deposit if you have one of the following:
a. Guarantor based in Australia who can offer a property as security or
b. Equity in an existing property
Generally, most lenders do not offer No Deposit Home Loans if you do not have a Guarantor or Equity in an existing property.
But you can still finance the purchase of your home with a relatively small deposit. Lenders typically require a 5% deposit so if you are buying a property for $400,000 this would be $20,000. It is important to note that lenders have a rule called genuine savings and this means that you must save this deposit at least over 3 months.
What is the minimum deposit?
With a 5% deposit Lenders Mortgage Insurance (LMI) will apply. LMI is a one-off fee charged by the bank in the unlikely event you default. LMI protects the bank and not your interests.
LMI can be added to the loan or paid up front.
Do not forget you need to also cover Government fees and charges when buying a property.
Lending Criteria for No or Low Deposit Home Loans
Lending Criteria for No Deposit or Low Deposit Home loans tends to be much tighter and lenders will require:
- High credit rating: Borrowers must have a high credit rating with the main credit reporting agencies (Equifax, Dun&Bradstreet, Experian). Responsible lending requirements mean lenders will make no exception regarding this requirement.
- Impeccable repayment history: All debts and responsibilities such as credit cards, personal loans and rent must be paid on time.
- Stable employment income: A stable job for at least 12 months is required with regular income
How do I start my home buying journey?
Lending requirements are always changing and it is important you discuss your needs with your mortgage broker. Contact What If We Finance today to find out more.