How to secure a mortgage without a deposit?
The easy credit days before the global financial crisis where banks would let you borrow 100 percent of the property purchase price – Believe it or not, it used to be quite common to get a mortgage that would cover the entire cost of your home, up-front costs and all.
However when the credit crunch hit, 100 percent mortgages were hard to come by, and for many years having a 100 percent mortgage left many homeowners with negative equity.
But with all that in the past, 2016 saw a new wave of 100 percent mortgages hitting the market. These days however they work a little differently from their pre-credit crunch ancestors, yet one aspect is very much the same – they let you buy a home without saving for a deposit.
How do 100 percent home loans work?
Basically they let you buy a home without saving for a deposit. For those struggling to save, 100 percent home loans let you borrow a higher percentage of the property value making it easier for you to own your home without spending the usual 20 percent deposit.
Here’s how to get a mortgage without a deposit
No genuine savings loan
Most lenders will require you to prove that you have genuinely saved for your deposit before they will approve the loan.
However a none genuine savings loan means you have been given your deposit either as a gift from your parents, sale of an asset, a bonus from work or has come from some other source that banks don’t consider to be regular savings.
You will have to meet the lenders standard lending criteria proving your employment, weekly salary, credit history, and the amount you can borrow will depend on your situation.
Having a guarantor for your loan
In most cases this is down to the bank of Mum and Dad. To help you secure your first home they will either give you your deposit or they will go guarantee for your home loan, which is secured on their property.
Guarantor loans are very popular with young couples wanting to own their own home quicker. Once you have paid off some of your loan, or your property has increased in value, and you’ve showed the bank you’re quite capable of paying your mortgage, you can then apply to remove the guarantee.
Shared equity schemes
Governments (the Vic Government in particular) are kicking in for house deposits which allow people to buy their first home, provided they can prove they can meet regular mortgage repayments, and are struggling to save for a deposit.
Singles earning less than $75,000 and couples earning a combined amount of $95,000 will be able to access the government scheme.
Affordable housing schemes
Housing affordability schemes that are associated with the National Affordable Housing Consortium (NAHC) like BuyAssist to make homeownership a reality for buyers that might otherwise be excluded from the housing market.
Programs are designed to help families, and potential home buyers earning between 60,000 – 120,000 combined incomes struggling to save for a deposit. It works by helping eligible buyers to meet the deposit requirements of the banks.
These types of schemes are great buyers who are trying to save for a deposit while renting, don’t have family support, and desperately want to own their own home.
So what can you do?
If you’re doing your best to save enough money each week to buy a home, but finding it really hard to save just the minimum five percent, you’re not alone. Renting is without a doubt the biggest part of the problem.
Look for an alternative solution then scrimping and saving for a deposit. Just because you’re on a limited income, doesn’t mean home ownership is out of reach.
For more information chat to BuyAssist about their financial support for no deposit programs, they have financial experts to see if you’re eligible to purchase a newly built approved property. Find out more at BuyAssist Australia.