Low Deposit Home Loan
How does a low deposit home loan work?
✅Borrow more than 80% of the property value and it is considered a low deposit loan.
✅Most lenders cap lending at 90% plus Lenders Mortgage Insurance (LMI).
✅Under some conditions you can borrow 100% plus purchasing costs.
✅Can receive relatively similar interest rates as a loan with a deposit over 20%.
What if I don't have any deposit?
You will need to get a little creative! Some lenders will accept:
✅Using your superannuation.
✅Equity in a property.
✅Gifted deposit.
✅Family Guarantor - can borrow 100% + LMI + purchasing costs. This is the only instance.
Should I just wait and save the required 20% deposit?
✅You'll have higher interest rate negotiating power.
✅Access to most lenders.
✅If property prices move, then you may keep missing out.
✅Rent money could be paying off your mortgage.
✅Speak to a broker and weigh up your options. A coffee and a chat; as simple as that.
I don't want to use a small lender. Do the major banks offer low deposit home loans?
✅Non-conforming lenders sometimes get a bad name as they are considered unregulated. This could not be further from the truth. In reality, think of these non-conforming lenders as specialists in any variety of niches such as a low deposit loan.
✅Major banks tend not to offer low deposit loans. There are exceptions, such as guarantor etc...
✅Non-bank lenders are less restrictive in their credit policies. They will look at your situation and apply a common sense approach, such as for teachers, police, fire fighters, and paramedics who have the lowest risk of default.
✅Major bank and non-conforming lenders tend to have similar interest rates.
How much deposit do I actually need?
< 3% Deposit:
✅This means 5% deposit with LMI capitalised on top of the loan (roughly $25K for a $500K loan).
✅There is no interest charged on the LMI portion.
✅Get the same interest rate as a normal borrower (as you have paid LMI)
👉You still need to come up with purchasing costs. Here are some options:
✅Get a guarantor loan from close family members.
✅Speak to your mortgage broker about the First Home Buyers grant.
✅Personal loan to cover the costs. You will need a high income with no debts.
5% Deposit. You will need:
✅Stable employment history. Over 12 months in the same job.
✅Good income or reliable serviceability ratio. I can work this out for you if you're unsure.
✅Asset position: lenders presume you should accumulate assets relative to your income.
✅Little or no debt.
✅Your deposit must be Genuine Savings.
✅Clean credit file - no missed payments or money outstanding.
✅Unless you are a first home buyer, you will pay full LMI.
10% Deposit. You will need:
✅Stable job.
✅Clean credit file - no missed payments or money owed.
✅Good income serviceability ratio or strong ability to make repayments.
✅At least 5% of this deposit must come from genuine savings over a course of greater than 3 months.
- some banks will use rental history as genuine savings!
✅Small to no credit card, personal loan or other debt.
15% Deposit. Is the same as 10% with the following exemptions:
✅In some circumstances can have LMI waived.
✅Can borrow up to $1,500,000 as opposed to <$800,000 with a smaller deposit.
Will I pay a higher interest rate than someone with a large deposit?
✅Not necessarily with the non-conforming lenders. They will consider each deal on a case-by-case basis.
✅Not if you are a teacher - even a causal or a temporary teacher.
- teachers also get waived LMI.
✅Not if you are a paramedic, fire fighter, police officer or an Emergency Services Officer.
- Emergency Services Workers also get waived LMI.
✅Not if you are a doctor.
- doctors also get waived LMI.
✅You should let your mortgage broker negotiate your deal.
How can I prove Genuine Savings?
✅3 months of regular payments to your savings account.
✅Shares or managed funds held for 3 months or more.
✅Some lenders accept rent paid as genuine savings.
What about Lenders Mortgage Insurance?
✅LMI is an important consideration with low deposit loans.
✅LMI is payable for deposits less than 20%.
✅It pays to include the cost of LMI when comparing home loans. It can drastically shape which lender you chose. Your mortgage broker will do this for you.
I'm here to help if you need me.
No fee service.
Matthew Stack
matthew@mortgagebrokerrevesby.com.au
www.mortgagebrokerrevesby.com.au
0423 237 242
#mortgage #lowdeposithomeloan #mortgagebrokerrevesby #mortgagebrokersydney
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