No Deposit Investment Loan
There are no longer any lenders in Australia offering No Deposit Loans. You can still borrow 100% with a Guarantor Loan.
Investing in property with no money down
This is the ideal loan for anyone who wants to get their foot in the door but has not yet been able to save for a deposit.
100% home loans are not just for first home buyers, but also for professional residential investors.
Providing that you qualify, you may borrow up to 95% of your investment property value, leaving you to only fund the costs of legal fees, LMI and stamp duty.
Why do investors prefer low / no deposit loans?
We recognise that saving a deposit for an investment property in today’s society of escalating costs is difficult. Even with a high income it can be difficult to enter the property market. So why are more investors deciding to borrow 100% of the value of their investment property?
- Negative gearing benefits: If you are on a good income then chances are that you are paying a high percentage your wages in income tax. By borrowing 100% of the property value, you can buy a property right now with the maximum possible leverage and reduce your tax bill right away.
- Buy more properties: Many professional investors grind to a halt when they run out of money to fund more deposits, even though they can easily afford the monthly repayments. By reducing the amount of money required to buy a property, they can vastly increase the number of properties that they can invest in and also maximise their capital gains.
- Avoid using your cash: Often investors intend to renovate a property, have a business with a high turnover or have other personal needs that require them to avoid using their cash as a deposit for their investment property. By borrowing 100% they retain their money for these other uses.
- Avoid using your equity: Large property portfolios can become complex with many loans from different lenders secured by different investments. By borrowing 100% you can avoid cross securitising your investments and in doing so keep your investing very simple. Other investors refuse to use their family home as security for their investment loans.
Can I borrow 106% to cover the stamp duty and LMI?
This is not possible without additional security. In the past these loans were available from First Permanent Building Society also known as establishment loan. First Permanent became a casualty of the credit crisis in 2008 and ever since the only way to borrow over 100% of the purchase price has been with another property as additional security.
You don’t have to use your own property as additional security! There is no problem with a parent or relative guaranteeing your loan using their property. By doing this you can borrow over 110% of the purchase price and pay no LMI!
Do I need savings or a small deposit?
Yes, as an investor you will need to contribute a small amount even with a 100% loan.
How does this work? Well the loan is for 100% of the purchase price, however you will still pay other expenses such as Lenders Mortgage Insurance (LMI), stamp duty, conveyancing fees, building inspection fees and pest inspection fees.
In total you should expect to pay 4% to 5% of the purchase price in stamp duties, fees and charges and around 2% to 3.5% in LMI. Overall, we estimate you should allow for 8% of the purchase price to cover your other costs.
What if you have a no LMI loan such as a quick start investment loan? Then you should allow 4% to 5% of the purchase price as a deposit.
When you talk to us in detail we will work out an exact figure for you.
How do I borrow 100% and pay no LMI?
A quick start investment loan allows you to borrow 100% of the property value without paying LMI. This is done by the lender taking on the risk themselves instead of obtaining Lenders Mortgage Insurance. Because of the higher risk the lender charges you a higher interest rate. The rate usually reverts to a lower interest rate after a few years, so overall a quick start loan is usually no more expensive than a loan with LMI.
The advantage of a quick start loan is that you can invest in property with a much smaller deposit than if you had to pay a LMI premium at settlement.
Do I qualify to borrow 100%?
No deposit investment finance has additional qualifying criteria to no deposit home loans for people buying a home to live in. The main requirements for investment finance are:
- You must have at least $100,000 in net assets (property, cash and shares) or 20% equity in your own home (minimum equity value is $50,000).
- Exceptions apply to buyers who wish to purchase their first property but choose not to live in it but use it as an investment due to wanting to continue living with parents or whose work requires them to be mobile.
- Exceptions may apply to applicants with incomes far exceeding the minimum required to service their loan.
- No equity requirement is applicable for loans with a guarantor providing a property as additional security for the loan.
The standard requirements for all no deposit loans can be found on our no deposit home page.
Can I buy an investment as my first property?
Yes, you can buy an investment as your first property. You will have to show a stronger financial position than most no deposit home buyers however, you do not need to show any savings or any equity / assets.
First home buyers do not receive the first home owners grant if they do not intend to live in the property they are buying. However they may receive the grant at a later date when they do buy a home to live in (refer to your state government for specific advice). There are links to the state government’s first home buyers websites on our no deposit for first home buyers page.
What types of investment properties are acceptable?
As a general rule, no deposit investment loans need to be secured by normal properties that are readily saleable in good locations. Location restrictions may apply to smaller towns or areas with struggling economies.
If in doubt, please check with us before you make an offer on a property. It is possible to borrow up to 95% of the purchase price with no location restrictions, but not 100%.
So what types of properties are not accepted for a no deposit loan? Properties such as rural acreages, serviced apartments, student accommodation, retirement units and multiple dwellings on one title are very tough to finance.
That being said one of our lenders can consider lending up to 100% of the purchase price against CBD units (inner-city apartments), company title units and even studio apartments as little as 25 square meters in size on a case by case basis.
What is the interest rate?
100% investment loans do not have any higher interest rates than normal home loans! If you are borrowing over $250,000 some of our lenders will even offer the same professional package discounts that are available with other home loans. With a quick start loan you will pay a higher rate but will not pay any LMI premium.
How do I apply for a no deposit investment loan?
We are experts in no deposit lending and have a passion for property investment. We’d love to help you with your next investment so why not send us a free online enquiry or call us at 1300 889 743 and find out what we can do for you?