Is a home loan possible with no deposit? We are both working (hubby full time, me 4 days per week). We have 1 child. We have been renting for the last 8 years with a perfect rental ledger (never missed a payment etc).
Hoping to eventually buy something!!
Not exactly correct. Alternative Property would need to be unencumbered (not mortgaged) . Then can borrow the deposit against equity of that property. But typically banks require a minimum of 10% and up to 20% deposit. This guy obviously has no other property otherwise wouldn't be renting for so long.
Alternative Property would need to be unencumbered (not mortgaged) .
Not exactly correct.I had my investment property bought 3 years ago and the house value increased then I use the increased liquidity to pay for my current house, I only need to pay 6% on the price of my house and use the liquidity of my investment house to fund the rest of the 14%.
OK. This worked for you and as a seasoned property investor I have done this too. But its a strategy for established property investors only, so doesn't work for everyone. We should be providing GENERAL ADVICE to the guy. Its really up to the guy's bank to sort this out. Like I say, this guy obviously doesn't have that option as it seems like he is looking to buy his first property.
@Amayzingone: I think if anyone tried to take an OzBargainer to court over financial advice thinking it was anything beyond "general advice"…I think the magistrate would have a hard time getting up from the floor from rolling around laughing. But you never know ;)
What are you talking about? It is not the general rule that a property can't have a loan if you want to use the equity in it for another loan. So long as you still have at least 20% paid off in the original property, you can use the excess equity for another property (assuming that second property meets other requirements).
If a loan had to be paid off in full before using the equity to buy another, no normal person would ever get two.
Strangest thing I've ever heard.
There has to be some minimum deposit for the bank to lend you. It used to be 5%, not sure what is the minimum these days.
If you are resident in WA, the govt offers home loans with 2% deposit if on relatively low income. Ceiling for house price is also set. It's called KEYSTART. No mortgage insurance to pay. House can be new, established or you can build your own. Another option, again under Keystart, and a great way to get into property ownership, is the 60/40 mortgage. You own 60% of the house and govt 40%. Opens the door for a eventual 100% ownership and in the meantime, it is your home. Good Luck with your first home purchase. You deserve every success.
I have read in the past (may be wrong) that some banks will take rental payments as a form of "savings'?
I don't think so. How do rental payments contribute towards ones savings??? Totally ill informed I'm afraid.
Hi tetress, did you manage to seek advice on this question?
We have helped people in similar scenario to you before, feel free to send me a PM if you would like to discuss your situation.
Yes, you can use your parents as guarantor based off the value of their home.
You need someone to put up something as guarantor. Im in a similar position, rented for 10+ years but never saved for a deposit. Banks will do 95% of the loan at best. They will ask the same question they asked me, if you can afford to pay off a house, why havent you been able to afford to save for a deposit? Seldom will a mortgage be less than the rent.
Good reply but banks still require a deposit. These days its at least 10% and possible 20%. So no deposit = no loan
The guarantor is the deposit. That person is literally signing over a % of an asset to the bank until the loaner has completed the loan. Example my parents own a $500k home, the bank needs 20% of the total loan amount of say $500k house, so my parents would sign over $100k of their house to the bank. If I default on the loan the bank will come knocking to my parents and if they cant front the cash, the bank will sell their home and take their $100k.
do u have a fully paid off house? u can use that
No.
Without a deposit you'll also have to pay LMI.
lots of LMI
I know what the LMI is on 5% and its eyewatering.
It is possible by using a "gift" from some relatives who are willing to help you. The banks Mortgage Insurer can consider that as genuine savings if you keep it for 3 months and add some savings to it yourself.
The bank would want a letter from the person who made the gift to certify that they are not expecting the money back. You would then agree with the donor to repay them separately.
That is how I purchased my first home.
Happy to provide more specifics over PM as I am a mortgage broker.
This is pretty unscrupulous advice from a mortgage broker.
Some lenders will lend without a deposit but as Dasher has said, they will require LMI and will closely scrutinise your financial situation.
Perhaps before going down this road you should ask yourself why you have no deposit saved.
This is not a go at you, but rather you need to assess your capability of going from zero savings to suddenly having to losing a significant amount from your take home pay for 30 years.
Are you prepared?
My experience will people with little to no savings history is that they have difficulty adjusting to living with such a 30 year commitment.
Perhaps before going down this road you should ask yourself why you have no deposit saved.
Exactly. It's basically what the bank will do to ensure that they get the loan is serviced. If you can't demonstrate your ability to save, how do you plan on actually servicing a loan?
If I'm OP, I would at least try to save 10% of what I want to buy. If you struggling to save then you know you will suffer when interest rate goes up one day.
And it will since home loan is a long term commitments.
losing a significant amount from your take home pay for 30 years.
They would already be doing that by paying rent but I agree with you. You really need savings more when you own a home because if something goes wrong then you are now responsible for the cost of fixing it. If you have 2 wages coming in and only 1 child then it should be pretty easy to save some money.
Mortgage repayments are almost always higher than rental repayments… Unless the OP wants to buy a one bedroom shoe box in a 500 apartment block building! Maybe then it would be equivalent to rental payments or slightly lower.
Plus, there are added costs with owning a home as you are now responsible for paying rates, owner's corp (if you have one), home insurance etc. And yes, maintaining the home if something goes wrong.
Also, OP it is not just the deposit you need but the other myriad fees like stamp duty, legal fees, etc. I also think it is worth asking why there are no savings, prior to committing to buying a house.
I've just gone from paying $2100 a month for a 2 bed apartment to $1600 a month for a three bed house. But now I have to pay for home insurance, council and water rates, more for the train ticket to work as I live further from work etc. All up excluding maintenance costs on the house I'm probably paying the same amount as I did when renting.
I assume you dont have an unencumbered property so answer is NO! Minimum 20% cash deposit these days plus cost of stamp duty and legals. You should really put this question to your bank as nobody here can grant you loan approval nor advise on you financial affairs.
HELOC.
I have bought an investment property at 100% before, a few years back. I had enough cash to cover the stamp duty and legals, which was around 5%. My situation was very unique though, parents guarantor, inv prop# 1 was cash flow positive, I could service the amount from my wages (even without rent). It can be done; however the landscape at the moment is such that I would find it unlikely.
In terms of percentage of your desired property price how much savings have you got?
Firstly, don't listen to Amazingzone. He is spitting rubbish. Minimum 20% deposit? No mate, no.
It will be close to impossible to get a loan without at least 5% deposit, but even that will be difficult. You're looking at wanting at least 10% deposit to get a better interest rate, and greater chance of approval. However if you have less than 20% deposit you have to pay Lender's Mortgage Insurance which is pretty expensive. Unfortunately it's the only option for a lot of ppl.
You need to go speak to a bank and they can tell you your options.
Just be careful about taking a 90-95% mortgage. That's a big repayment you'll be having to make every month and you really need to make sure you can service it before you do something like that.
It's so hard to rent and save a deposit. Almost impossible for most ppl. =/
if you have other liquidity(From other property) to service the 20% of the loan then yes.
Perfect rental ledger wont help.