No deposit to buy a house

Any general questions you might have in regards to loans and finance.
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moodyjack
Posts: 47
Joined: Wed Jun 17, 2009 4:36 pm

No deposit to buy a house

Post by moodyjack »

Hi there guys, I am thinking about buying a house but not sure if I have enough money for the deposit. I know that we are usually required to put down about 5 to 10 percentage of the property value as a deposit. Could I possibly get my loan approved without a deposit? Are there any banks that allow this?

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Otto Dargan
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Re: No deposit to buy a house

Post by Otto Dargan »

Hi and welcome to the forums moodyjack,

There are some possible options available for you to borrow and get approved for a no deposit home loan. These possible options are:
  • Applying for a guarantor loan: With this loan you can borrow up to 105% of the purchase price and you don’t need any savings.
  • Using a gift: If you have received money as a gift from your parents and if it makes up for around 5% to 15% of the purchase price then this may be seen as non-genuine savings. You may be able to borrow up to 95% of the property value with a gifted deposit.
  • Equity in another property: If you already own another property then you can use the existing equity in your current property as a deposit.
  • Superannuation: You can use your superannuation to set up a self-managed superannuation fund (SMSF) and buy the property if you have over $100,000 in superannuation. You may be able to borrow 80% of the purchase price however the property must be an investment and not your home.
  • Vendor finance: If you have a small 3% to 5% deposit and have trouble qualifying for a bank loan due to problem with your credit history and not being able to find a guarantor then you can use vendor finance. Since vendor finance can be very expensive this should only be used as a last resort option.
You can also try the No Deposit Calculator to check whether or not you qualify for a no deposit home loan. However, this should be used as a guide only.

Cheers,
Otto
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts

moodyjack
Posts: 47
Joined: Wed Jun 17, 2009 4:36 pm

Re: No deposit to buy a house

Post by moodyjack »

Well, what do banks usually look at when they lend to someone without a deposit?

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Otto Dargan
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Joined: Sat Sep 06, 2008 5:55 pm
Location: Sydney, Australia
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Re: No deposit to buy a house

Post by Otto Dargan »

Hi moodyjack,

Lenders tend to have very strict credit guidelines when assessing a no deposit home loan application. The things they look at are:
  • Credit history: You must have a perfect credit history especially if LMI approval is required for the loan.
  • Repayment history: All of your current debts such as credit cards, personal loans and rent must be paid on time.
  • Location restrictions: Most other lenders are very strict about the location that you are buying in. You must be buying in a major town, capital city or regional centre however one of our lenders is willing to consider anywhere in Australia.
  • Property type: You must be buying a standard type of property such as a house, townhouse, unit or vacant land. If you a good income then you may be able to receive loans for duplexes, inner-city apartments, studios, bedsitters and even company title units. It is better if you speak to us to know if this is possible or not.
  • Stable employment: You should have a stable and ongoing employment.
  • Income: Your income must be high enough that you can easily service the loan. You cannot borrow to your limit with a high LVR mortgage.
  • Professionals: Professionals such as an accountant, lawyer, doctor, vet, nurse, government employee or a teacher may find it easier to get a loan as these professions are known to be a low risk borrower.
You can give us a call on 1300 889 743 or fill in our free assessment form to find out what your chances are to qualify for a no deposit home loan.

Cheers,
Otto
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts

moodyjack
Posts: 47
Joined: Wed Jun 17, 2009 4:36 pm

Re: No deposit to buy a house

Post by moodyjack »

I will just give you a call since I am not sure if I meet these guidelines or not. Speak to you in a few days, bye!

afish
Posts: 63
Joined: Mon Jun 15, 2009 4:46 pm

Re: No deposit to buy a house

Post by afish »

Hi there, I was also thinking about buying a house without a deposit. I read through the options and I would like to know more about the guarantor loan. Can you tell how this works exactly?

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Otto Dargan
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Posts: 7730
Joined: Sat Sep 06, 2008 5:55 pm
Location: Sydney, Australia
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Re: No deposit to buy a house

Post by Otto Dargan »

Hi afish,

The way this loan works is that the guarantor will secure your loan against their own property. In most cases it will be your parents who would provide a guarantee on your loan since most lenders only allow the parents to act as a guarantor. Some lenders do allow immediate family members such as siblings, grandparents, spouses, partners or adult children however you would need to meet additional criteria to qualify for a home loan.

As a borrower of the guarantor loan, you have the following benefits:
  • No need for a deposit.
  • No need to pay the LMI premium.
  • Discounted interest rates provided by some lenders.
  • Consolidation of some minor debts such as credit cards when buying a home.
  • The size of the guarantee limited.
Cheers,
Otto
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts

afish
Posts: 63
Joined: Mon Jun 15, 2009 4:46 pm

Re: No deposit to buy a house

Post by afish »

I will contact you in a few days after speaking to my father. Thanks for sharing this info.

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