No Deposit Loans
With home-ownership becoming more difficult due to rising prices and higher costs of living, a no deposit home loan may be an option for those who may otherwise have difficulty in securing a home.
What is a no deposit loan?
Lenders have recognised the difficulty that many aspiring home-owners experience in entering the market, and are offering loan products that allow borrowers to purchase a property without the 10% deposit normally required, lending 100% of the property value.
How does a borrower qualify?
In most cases, where the borrower has is able to bear the costs associated with the purchase of a property, the lender will approve the loan provided that the borrower can prove a solid savings history. Costs to be borne by the borrower are stamp duty, government registration fees, and conveyancing/legal costs.
No deposit loans are available to owner-occupiers only. Investors do not usually qualify.
Do no deposit loans cost more?
Yes, they do. For a start,
mortgage insurance will add to the cost of the loan. The interest rate and establishment fees associated with a no deposit loan are likely to be higher, and there may be other restrictions:
- The lender may require a "buffer" of 2 to 3 per cent to ensure that the borrower can deal with future interest rate rises.
- There may be a requirement for accelerated repayments during the early years of loan, to minimise the borrower's debt.
- Borrowers may have to demonstrate a greater ability to service the loan.
- A higher degree of stability and continuity of employment may be required.
- Some properties, such as studio apartments, may not qualify as security.
Is a no deposit home loan the way to go?
This depends on your needs and your circumstances. In some cases it may be a better option to simply rent for a while, save a full deposit, and then purchase.
Real Choice Mortgages has access to a number of specialist lenders who provide no deposit home loans. To find out more about no deposit home loans, or to discuss your needs with a qualified consultant,
contact Real Choice Mortgages now.
