No and low deposit mortgages: benefits and drawbacks



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April 6, 2011

While no deposit home loans and low deposit home loans have become harder to come by in the wake of the Global Financial Crisis, if you can track one down, it can help you to buy property when you have little or no savings to put towards a home loan deposit. If you’re a first home buyer, a low deposit home loan may be a great way to purchase your first property, but this type of loan may also suit you if you’re buying your next property or returning to the property market after some time out of the game.

Often also referred to as 95 percent loans or 90 percent loans, low deposit home loans require you to:

  • Have a solid, stable income. This means at least 12 months full time employment or proven consistency in a particular line if you work for a number of employers.
  • Demonstrate at least some genuine savings (Some lenders may allow you to make up your home loan deposit from a range of sources.
  • Meet criteria that may be a little stricter than if you had a larger deposit.
  • Keep some savings aside to cover the other fees and charges associated with buying property such as stamp duties and lenders mortgage insurance
  • Your low deposit home loan may also have slightly higher interest rates.

If you can’t find a no deposit home loan you might consider using family equity.

 

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