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To apply for a home loan you will need a cash deposit. In most cases, lenders will lend up to 80% of the property value. This means you’ll need to come up with the other 20% (your deposit). For a property worth $400,000 for example, you’ll need a cash deposit of $80,000.

When you have ongoing bills, groceries, rent or an existing mortgage to pay, $80,000 is a lot of money to come up with any many people, "especially First Home Buyers", think not having a 20% deposit puts them out of the buying market. This is not the case. Some lenders understand this and will allow you borrow more than 80% of the property’s value. There are even some lenders who will lend you up to 95% – meaning your deposit will be 5% (plus any associated purchase costs). This means that if the property you want is $400,000, 5% of that would be a $20,000 deposit and certainly a bit more doable.

Keep in mind that the smaller deposit comes with a greater risk. Should interest rates rise or unexpected expenses pop up and you’re borrowing at maximum capacity, you could get caught short. Because there’s a greater risk, you’ll need to pay Lenders Mortgage Insurance (LMI) if your deposit is under 20%. LMI is designed to protect the lender, in the event you default on your home loan (i.e. can no longer make your repayments). You can pay your LMI as an upfront cost or, depending on how much LMI you have to pay, you can add it to your home loan amount.

For more information on LMI please feel to get in touch...

A guarantor is someone who provides extra security by ‘guaranteeing’ a portion of a loan. This is a great way to help a friend or family member purchase their home sooner, but before you jump in, you need to know what you are getting yourself into.

There are two types of guarantees:

1. Security guarantee:

The guarantor uses real estate that they own as additional security for your loan. If the guarantor already has a loan on their property, then, in most cases, the bank can take a second mortgage as security. This type of guarantee is most often used when first home buyers are buying a home but have little or no deposit.

2. Security and income guarantee

The guarantor uses real estate they own as additional security as well as using their income to assist in the serviceability of the loan.

A guarantor is not a co-borrower and so will only become liable for the amount they’ve guaranteed if the borrower cannot make their repayments. A guarantor is entering into a legal contract. There’s also financial risk involved in being a guarantor so it’s strongly recommended that any guarantor seeks independent legal and/or financial advice before entering into the contract.

For more information on Guarantor Loans please feel free to get in touch...

Arrange your finance first and you could be streets ahead of other buyers when the time comes to make an offer.

When it comes to buying property there’s no such thing as too much research. Your local real estate agent can provide you with lots of useful background information on the neighbourhood and can get you up to speed on similar sales in the area. At the same time, I can help you organise a home loan pre-approval to give you the confidence to make an offer.

6 reasons why you should apply for a pre-approval*

1. Take advantage of the shifting market.

2. Bid with confidence, arriving prepared with finance ready.

3. Be a serious buyer to sellers. A buyer with a pre-approved loan is a much surer bet than someone whoi has yet to arrange their finances.

4. Know your borrowing capacity so you can narrow your property search and find the home you can afford.

5. Pre-approval is valid for up to three months. #If you don't find your dream home during that time, reapplying is simple.

6. It costs you nothing to get pre-approved.

Once you have your pre-approval, you are now ready to start looking for your new home or investment property. Please feel free to download the attached flyer which will provide you with some important tips on what to do next and help you avoid making some common mistakes. 

If you're thinking of buying you've absolutely nothing to lose by organising a pre-approval ahead of time! 

To apply for a home loan you need a cash deposit. In most cases, lenders will lend up to 80% of the property value. This means you’ll need to come up with the other 20% (your deposit). For example, for a property worth $400,000, you’ll need a cash deposit of $80,000.

Outlined below are a few of our most common questions:

What if I don't have a 20% deposit?

When you have bills, groceries and rent or an existing mortgae to pay, $80,000 is a lot of money and it's difficult to save that amount of money. Some lenders understand this and will let you borrow more than 80% of the property’s value. Some will lend you up to 95% – meaning your deposit will be 5% (plus any associated purchase costs). This means that if the property you want is $400,000, 5% of that would be a $20,000 deposit and certainly a bit more doable.

Keep in mind that the smaller deposit comes with a greater risk. Should interest rates rise or unexpected expenses pop up and you’re borrowing at maximum capacity, you could get caught short. Because there’s a greater risk, you’ll need to pay Lenders Mortgage Insurance (LMI) if your deposit is under 20%. LMI is paid to the bank’s insurer to cover the bank in the event you default on your home loan. You can pay your LMI as an upfront cost or, depending on how much LMI you have to pay, you can add it to your home loan amount

Can I still borrow if I don't have a deposit?

If you've found saving a deposit to be challenging and you want to get off the rental wagon and own your own home sooner, you may be able to get help from a family member who can act as a guarantor on the loan. The guarantor – who must be an immediate adult family member – agrees to use the equity in their property as additional security for your property, instead of a deposit. Keep in mind that your family guarantor may need to have their mortgage with the same bank, so they might have to consider moving their home loan.

As the borrower, you’ll need to be able to repay the home loan like normal. Once you’ve paid off part of the loan or your property has increased in value, you can apply to remove the guarantee. This means your family member will no longer be liable for any default on the repayments.

Are there any additional costs I should know about?

In addition to your deposit, you'll need to keep in mind that there are some other upfront costs you’ll need to budget for. These include things like stamp duty, home insurance, pest and building inspections, and moving costs. Then there are ongoing costs to consider like council rates and strata fees. 

If you'd like to know more about your home loan deposit options, feel free to get in touch...