Low Deposit Home Loans – Buy a Property Without Adequate Cash Deposit

Are you one of the many people who:

– Are a first-time home buyer and don’t have adequate deposit to buy your first property?

– Are a current home owner, but don’t have adequate cash deposit to buy another property? or

– Are retired and wish to downsize from the family home you have lived in for 45 years, but have no cash reserves?

If you fit into any of the above situations and you want to buy a property, you may have recognised that:

– It can be frustrating to find a suitable home loan; and

– Major banks and some lenders have introduced stricter lending criteria, since the GFC (Global Financial Crisis).

Interestingly, it doesn’t have to be frustrating to find a suitable home loan, as there are still some lenders/credit providers who offer low deposit home loans. But, the key to finding the right low deposit home loan will come down to knowing which lender/credit provider can provide a suitable low deposit home loan solution that will cater to your particular situation Fisher.

If you are looking for a low deposit home loan, here is a list of options you can consider:

Note: Whatever option you decide to choose, will depend on what the “vendor” (seller) is prepared to accept.

Option 1 – 5 Percent Cash Deposit

There are still a number of lenders/credit providers that offer low deposit home loans. They will allow you to borrow up to 95 percent of the Loan-to-Value Ratio (LVR) of the security property. However, given the high LVR, they will be looking closely at your capacity to repay the home loan. So, you will need to:

1. Demonstrate a strong and stable income; and

2. Show at least some genuine savings.

Option 2 – Deposit Bond

Many home buyers do not have the ready cash to pay a deposit of 10 percent of the purchase price of a property. In such a situation, a deposit bond can be of help. It is a guarantee to the vendor, by an insurance company, that the vendor will receive 10 percent deposit.

How does a Deposit Bond work?

By taking out a deposit bond, the home buyer is taking out an insurance policy. The policy tells the vendor that the insurance company will pay 10 percent deposit to him.

Where can a Deposit Bond be used?

A deposit bond can be used as an alternative to a cash deposit. If the deposit bond is used properly, it will be of benefit to all parties involved in a real estate transaction (i.e. the vendor, the home buyer and the real estate agent). In fact, no money actually changes hands. Instead, all purchase funds are paid in full at settlement, and the deposit fund simply lapses after settlement. Some examples of where a deposit bond can be used are:

– You need a 10 percent deposit, but you only have a 5 percent deposit, and you have been approved for a home loan of 95 percent of the purchase price of the property;

– You have a deposit available, but your funds are tied up in shares or managed funds, and you don’t want to liquidate immediately; or

– You are selling one property and purchasing another property, and you don’t have a 10 percent cash deposit.

Option 3 – Bank Guarantee

Another option for you to consider is guarantor home loan. It has the potential to help you save thousands of dollars in Lenders Mortgage Insurance (LMI). It is a type of home loan in which another person (such as a parent) puts up their own property as security. It will enable you to borrow up to 10 percent of the purchase price of the property, without needing a deposit.

Normally, if you borrow more than 80 percent of the property value, you are required to pay LMI to the lender/credit provider. So, if you choose to use a guarantor home loan option, then be sure that the LMI premium is waived.

Seek Assistance from Expert

With so many different lenders/credit providers to choose from, you can seek help from a professionally qualified and licensed finance/mortgage broker to do all the leg work for you. He/she will:

– Negotiate with lenders/credit providers on your behalf to arrange a low deposit home loan that best suits your needs and situation;

– Manage the loan process right through to settlement and be there for you at post-settlement;

– Find out your eligibility for the First Home Owners Grant (FHOG) Scheme;

– Explain the process of the FHOG application to you; and

– Help you to determine your overall serviceability position.

Do not worry if you want to buy a property without adequate cash deposit. Simply take help of a licensed finance/mortgage broker and make a quick purchase.

5 Tips For Utilizing a Mortgage Calculator to Help Compare Cheap Home Loans

A mortgage calculator is an essential tool when you are considering purchasing a new home. Whether this is your first home or your fifth home, a home loan calculator, as it is also referred to, can be an invaluable asset in making wise, secure business decisions about the home that is right for you and your budget.

Purchasing a home and committing to a new debt load can sometimes be a little anxiety-ridden. However, keep in mind that the mortgage calculator can take a lot of that anxiety out of the equation by giving you the peace of mind necessary to know that you are making a good decision for your future. By using a home loan calculator, you can be sure that you are buying a home that will match your family’s budget for years to come.

Listed below are 5 tips that will assist anyone in utilizing the calculator in making a wise home loan decision:

* 1. Use the calculator to determine the difference that various interest rates can make in your total monthly payment. In other words, make certain that when you negotiate the interest rate on your home loan you have already utilized your mortgage calculator to know the difference in the total note payment at a 5% interest rate versus a 7% interest rate for example. This gives you the ability to negotiate with the broker or lending institution with the proper information at your fingertips, and provide them with parameters that will work for you and your budget ACT.

* 2. Make sure that you can afford the purchase price you plan to offer a seller on a home. How do you do that? Again, by using your calculator, and entering various purchase prices into the calculator at realistic interest rates and term lengths, you can quickly determine what price home you can afford to purchase by comparing the calculated monthly payments with what you have decided that you can afford. At this point, no matter how much you might love a higher priced home, you have to be realistic and stay within your price range.

* 3. Next, determine whether you can afford a 15 year mortgage or whether you should consider a longer term such as 20 or 30 years. The longer the term of the mortgage the lower the payments, but the more interest you will ultimately pay over the lifetime of the loan. Keep in mind, however, that if your financial situation changes, you can always pay “extra” toward the principal of the loan each month and reduce the number of years required to pay the loan off in full.

* 4. Use the mortgage calculator to determine what the “real” cost of the home will be over the lifetime of the loan. With the home loan calculator, an amortization schedule is provided. This schedule gives you complete information on how much you will pay in principal and interest each year of the loan until the time that the loan is paid in full. This information tells you exactly what the total cost of the home will be at the time that it will be paid off in full. This again, helps you to determine what areas of the loan you need to negotiate to feel comfortable with the purchasing decision you are about to make.

* 5. After determining a realistic purchase price, interest rate, and term for the loan, you now have a basic monthly payment. However, don’t forget, your home loan calculator does not figure real estate taxes and insurance. Consequently, it is imperative that you take the monthly payment given to you by the calculator and add a monthly amount for the real estate taxes and the insurance. The current owner or the realtor can provide you with the amount being paid by the existing owner for both of these. You can also contact insurance agents to compare prices offered for home insurance on the property.

You might also want to remember that, although the above items cover the monthly “hard” costs for the home, you will need to be certain that you have taken into consideration the fact that the home will need repairs and maintenance. Although it is impossible to predict exactly what these will cost you during your years of home ownership, you are advised to make an estimate. Many factors must be considered, such as the age of the property, how well it has been maintained, and whether you can do a great deal of the work yourself or will need to hire contractors.

In summary, the home loan calculator is a tool you should use not only when you purchase a home but also anytime you are considering refinancing your home or establishing a line of equity on your home.

You will find a number of websites that provide free mortgage calculators for you to use. You should never go property-hunting without doing your research first. Make certain you have done your homework prior to making an offer on any home by using the mortgage calculator to look at all the possible scenarios. Know exactly what you can afford to offer and do not go a penny more.