First home buyers no deposit loans

Use your First Home Owners Grant to buy with no deposit!

If you are a first home buyer you can often buy a home with no deposit AND get a discounted rate!

Thanks to the federal government’s first home owners grant, various other government subsidies and a range of new discounted 100% first home buyer loans, it is easier than ever to buy your first home without a deposit. This guide has been designed to help you take the first step to owning your own home.

How does a no deposit loan work?

A no deposit loan will allow you to borrow up to 100% of the purchase price. They are still available with all the normal loan benefits such as 100% offset, fixed interest rates and interest only periods. Many people are eligible for discounted professional package interest rates, basic loan packages and application fee waivers as well!

The main fee that you may pay for a no deposit home loan is Lenders Mortgage Insurance (LMI). This is insurance that protects the bank in the event that you do not repay the loan. The cost of LMI can vary between 2% and 3.5% of the loan amount and is payable once only when the loan is advanced.

Will I pay a higher interest rate?

Actually you will probably get a rate discount! If your income, job and credit history are all acceptable to the bank then you are a highly sought after borrower. Banks are increasingly recognising the value of first home buyers so have offered a range of discounts on their interest rates, loan approval fees, application and valuation fees.

You can expect to get a rate discount of between 0.4% and 0.7% off the bank standard variable rate.

How much is the First Home Owners Grant?

The federal governments First Home Owners Grant (FHOG) is normally for $7,000 and is payable when you buy the property. The government has temporarily increased the grant to $14,000 for anyone buying their first home or $21,000 for anyone building a new home or buying a home that has just been built. All contracts entered into by 30 June, 2009 will be eligible for this new additional assistance.

Note that some states have additional grants, such as the NSW additional $3,000 grant for anyone building a new home which results in first home buyers receiving a total of $24,000. Refer to your state government for the full details.

You apply for the FHOG through your bank when you apply for your loan and the funds will be advanced with your loan at settlement. If you are building a home then you receive the grant when you apply for your first construction drawdown.

Do first home buyers get any other benefits?

Yes the state governments offer a range of stamp duty exemptions, additional grants and other benefits that can help you to buy your first home. We recommend that you refer to your state government first home buyer website for the full details:

• ACT First Home Buyers
• NSW First Home Buyers
• NT First Home Buyers
• QLD First Home Buyers
• SA First Home Buyers
• TAS First Home Buyers
• VIC First Home Buyers
• WA First Home Buyers

If you aren’t sure what benefits you may receive we recommend that you call your state’s first home buyer hotline.

How much do I need as a deposit?

With a new “quick start” no deposit loan first home buyers can buy a home up to $500,000 with no deposit!

The amount you need to save as a deposit depends on the state you are buying in and if you are receiving other first home concessions. The other major factor is the type of loan you are applying for, a no deposit loan with a discounted rate and an LMI premium, or a quick start no LMI loan with a higher interest rate. Overall the cost of these two types of loans is roughly the same however you need to put in less money up front to buy a home if you are applying for a quick start home loan.

Standard no deposit loans: If you are buying a property under $300,000 you very rarely need to save any money for a deposit. If you are buying a property for between $300,000 and $500,000 then you may need to save 1% to 1.5% of the property value. If you are buying a property for over $500,000 then you may need to save between 2% and 3% of the purchase price due to the higher LMI premium.

Quick start no deposit loans: With a quick start loan you do not need any savings to buy a property up to $500,000 and will need only around 1% or less of the purchase price to buy a home between $500,000 and $600,000.

What if my parents are helping me?

Did you know that 60% of first home buyers receive some sort of help from their parents? As a first home buyer there are two main ways that your parents can assist you with your purchase.

• A gifted deposit: In the past most lenders required proof that you had saved your deposit, known as genuine savings. The rational is that if you can save money, you can repay a loan. These days few lenders mind where your deposit comes from unless it is borrowed. Some lenders such as St George and Westpac may charge you a higher LMI premium if your deposit isn’t saved.
• Guaranteeing your loan: If your parents offer their home or an investment property as additional security for your loan then the bank can lend you 110% or more of the property value with no LMI and a low rate! If your parents are willing to help then this can save you thousands!

What costs are associated with buying a home?

There are several costs you may incur when buying your first home. You should discuss these costs with your mortgage broker or conveyancer before signing the contract to buy a property.

• Mortgage stamp duty: This is a hidden state government fee that is calculated based on the amount that you borrow. Most states either waive this for first home buyers or are phasing this fee out.
• Purchase stamp duty: This is one of the most expensive costs associated with buying a home. Some states offer stamp duty concessions for first home buyers. You can find a stamp duty calculator on most state government websites that will take any first home concessions into account.
• Registration fees: Another government fee! This is a small fee of around $200 for registering the change of name on the property title and registering the new mortgage on the title.
• Conveyancing / legal fees: You can expect to pay between $700 and $1,500 for your conveyancing costs for a standard first home purchase. Contact us and we may be able to recommend a good conveyancer to you.
• Lender fees: Some lenders charge setup fees of up to $850 whilst others will waive all the setup fees for your loan. We can provide you with a free quote for your no deposit loan interest rate and fees.
• LMI: This is the other major cost of buying your first home with no deposit. LMI can range from $0 for a quick start loan up to 3.5% of the loan amount. Contact us for an LMI quote. Or alternatively, use our online LMI premium calculator to find an exact premium for your situation.

How do I apply for a first home buyer no deposit loan?

Contact us or enquire online and we can quickly let you know if you are eligible to borrow 100% as well as work out if you need to save a deposit and what interest rate discounts you may be eligible for. We work with all the major bank and non-bank lenders and charge no fees for our services for most standard residential loans.