Can I take out a no deposit investment loan?

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bond
Posts: 8
Joined: Thu Mar 12, 2015 5:53 pm

Can I take out a no deposit investment loan?

Post by bond »

Hi,

As I’d planned on buying a house for myself, I’d been saving up for quite a while. I’ve got around 40k in savings, which should qualify as genuine since they’ve stayed in my savings account for over half a year. As luck would have it though, I inherited my uncle’s house right when I was in the cusp of getting a mortgage.

I don’t think I’ll be buying a house for myself anytime soon seeing as I really love the house I got. My girlfriend suggested I invest in property instead. So now, I’m planning on getting an investment loan.

What I want to know is if I can take out a no deposit investment loan. Can anyone explain this to me?

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Otto Dargan
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Re: Can I take out a no deposit investment loan?

Post by Otto Dargan »

Hello bond.

Welcome to the forums.

Yes, it’s possible to get a no deposit investment loan, with the most popular option being with the help of a guarantor.

A guarantor is a third party who will provide a guarantee for your investment loan, which is secured on their personal property. If for some reason you’re unable to pay back the loan, the guarantee will be exercised to recover the debt.

It should be noted that most banks won’t accept anyone except for your parents as guarantors. Some lenders may accept immediate family members such as siblings or grandparents but you may need to meet additional lending criteria in order to qualify.

Some lenders may even accept a gift as a deposit. You may also use the equity from your existing property to get a bigger deposit or simply use a personal loan as a deposit.

By the way, a 40k savings is 20% of 250k essentially meaning you may be able to get a $200,000 investment loan at 80% of the face value without a deposit.

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

bond
Posts: 8
Joined: Thu Mar 12, 2015 5:53 pm

Re: Can I take out a no deposit investment loan?

Post by bond »

Oh… I had no idea that we could use a guarantor to help us take out a no deposit investment loan. Yeah, I figured I could take out at least that much without a deposit but I want to to take out more because I want to use my savings for something else. Hey Otto, can you explain ‘personal loan as a deposit’ please?

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Otto Dargan
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Re: Can I take out a no deposit investment loan?

Post by Otto Dargan »

Hi bond,

Well, you can take out a personal loan to use it as a deposit but in order to get it accepted by the lender, most lenders may need you to have:
  • A high income, strong enough to be able to afford both repayments.
  • Little existing debt such as car loans, credit card debt, etc.
  • A clean credit history without any records of defaults, judgments or too many credit enquiries.
  • Some savings just in case there’s a shortfall.
  • A proven rental history although it’s not necessary. However, it is preferred by lenders.
You’ll essentially be taking out two loans. A small personal loan, e.g. about $20,000 may not be very difficult if you have a good income. If you opt to take out more then it may be a bit difficult to manage.

Like most other first home buyers or investors who choose this option, you can plan to pay off the personal loan first and then only start making additional repayments (if you want to) to your investment loan.

You can learn more about no deposit investment loans on our website. If you want to discuss things directly with one of our credit specialists then you can call us on 1300 889 743 or fill in our free assessment form and one of our brokers will contact you instead.

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

bond
Posts: 8
Joined: Thu Mar 12, 2015 5:53 pm

Re: Can I take out a no deposit investment loan?

Post by bond »

Thank, Otto. That was a neat explanation. I’m really inclined towards this ‘personal loan as a deposit’ option so expect a call from me by tomorrow or the day after that. We’ve got much to discuss. I’d really like you guys on my case. Hope everything will turn out well :)

twenty
Posts: 14
Joined: Thu Mar 12, 2015 5:57 pm

Re: Can I take out a no deposit investment loan?

Post by twenty »

Hello everyone! I was thinking of taking out a home loan but something came up and I had to use all of my savings to deal with it. Because of that, I’ve got no savings that I can use to take out a mortgage. I was considering going guarantor but I’m not too sure about that.

While looking for alternate options, I read somewhere about the idea of using the money from our super as a deposit. Can this be done?

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Otto Dargan
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Re: Can I take out a no deposit investment loan?

Post by Otto Dargan »

Hi twenty,

Unfortunately, the option of using your superannuation as a deposit is not a valid option right now. Although the Australian Government has considered this legislation, a decision has yet to be made.

You can, however, use your super for an investment loan, granted it’s a self-managed super fund or SMSF.

The best way you can borrow without a deposit would definitely be with the help of a guarantor. Here are a few things that may get you to reconsider a guarantor home loan:
  • You won’t need a deposit, which means you’ll be able to buy immediately.
  • You can avoid Lenders Mortgage Insurance (LMI) completely, saving you thousands of dollars.
  • Some lenders may offer discounted interest rates.
  • Small minor debts like credit card debts can be consolidated when you buy your home.
  • You may be able to limit the size of the guarantee.
If you’re still unsure or looking for other alternate options, you can call our office or browse through our website.

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

twenty
Posts: 14
Joined: Thu Mar 12, 2015 5:57 pm

Re: Can I take out a no deposit investment loan?

Post by twenty »

Yes, you’ve changed my mind - I’m reconsidering getting my parents to help with my home loan. I’ve not decided on anything right now. Maybe I‘ll call you in a few days to discuss other options that may be available. Thank Otto and have a nice day.

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