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Last Updated on 5 October 2019

No Deposit Home Loans

Owning your home is quite often referred to in the media as the great Australian dream. Is home ownership still attainable if you don’t have enough funds saved for a full deposit?

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Many home loan providers are giving potential owners the chance to step up the property ladder even if they have not saved enough money for a deposit.

Find out how.

Image by Diana Parkhouse.

Image by Diana Parkhouse.

It seems property prices just keep on going up. Rent also seems to be going in the same direction. It is nearly impossible for most people to save for their first home deposit without staying in seven nights a week and having two-minute noodles for dinner. Owning their first home may seem out of reach for many young people.

Low or no deposit home loans are currently being offered by some banks and financial institutions in the market. How does this work? These agreements, more often than not, require the involvement of a guarantor.

What Is A Guarantor?

A guarantor is basically someone who signs the contract stating that they promise the first party (the borrower) will pay back the whole amount to the second party (bank or financial institution). If the borrower fails to stick to the agreement of the deal with the bank, the guarantor takes on the responsibility of the amount borrowed. The guarantor must pay back the bank if the borrower can’t meet their financial commitments. For younger borrowers, the guarantor can sometimes be a parent or family member. Thanks Mum!

How Does This Affect The Home Loan?

With the guarantor now roped in to the terms of the home loan, a person may seek to borrow up to 100 per cent of the amount of the house or apartment they have their heart set on. This is ideal for someone who has not saved enough for a deposit. Essentially, this is a no deposit home loan. They may still be entitled to goodies such as the First Home Owners Grant. First home buyers may also have the appropriate taxes (or duties) waived on their application. These can vary from state to state, so it is a good idea to check with local authorities and banks/mortgage brokers.

Are There Any Fees Involved With A No Deposit Home Loan?

Unless you have an extremely generous parent, you will still have to fork out some money if you apply for a no or low deposit home loan. Of course, the bank, mortgage broker or financial institution will check to see if you can afford to make the regular repayments. You will need to have some money to pay costs such as legal fees, any government charges as well as mortgage insurance fees.

With anything that requires you to fork out a little (or a lot) of money, it is always a good idea to shop around. This is especially true for someone looking to buy their first home. See what is on offer as products and conditions can vary from lender to lender. Some home loan companies may charge a little extra interest on no or low deposit home loans. Be sure to do your homework. It will be worth it in the long run.

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