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Is a No-Deposit Home Loan Right For You
A no-deposit loan is an attractive option for people having difficulty acquiring their first home or an investment property due to lack of funds. With this type of loan, they can jump in and buy the property right away.
However, taking out a no-deposit loan is something that should be considered carefully. After all, despite the attractive set up it offers, it also comes with a number of caveats. For one, this type of loan typically comes with high interest rates. Aside from that, you might need to provide extensive proof of your ability to repay the loan before the lender approves your application.
In this article, we will help you decide whether or not a no-deposit loan is right for you. Below are things you need to consider—and if any of them apply to you, then go ahead and get the best rates for your loan.
So a no-deposit loan may be right for you…
- If you have a guarantor. This is a primary requirement lenders have from people applying for a no-deposit loan. Basically, a guarantor is someone who will be willing to put up their property as security for your loan. The guarantor can be anyone, however, lenders nowadays choose only parents of loan applicants as valid guarantors.
Thus, if your parents are willing to act as guarantor on your behalf, then congratulations, you just might be able to take out a no-deposit loan. However, keep in mind that this set up requires a huge responsibility on your part. You need to make sure that you can make the repayments of the loan. Otherwise, not only will you risk losing your own property, but your guarantor might also lose theirs. So think hard and deep about jumping into a no-deposit loan. From there, you also need to know…
- If you are confident about making repayments. Whether or not you have a guarantor, you need to know if you can indeed afford the repayments of the loan. But how exactly do you find that out? An example would be if the repayments are equal or at least close enough to the amount you are spending on rent. In that case, it would make perfect sense to take out the loan since you know that it is within your budget.
It also helps to be aware of your actual financial situation. So unless you know how much money is coming and out of your household on a regular basis, then it is probably time that you do so. Budgeting is key to knowing if you can afford any loan, as this will tell if you could stretch your funds enough to accommodate the new debt that you are planning on taking.
- If you are getting a standard property. Since the global financial crisis, lenders have been pretty strict when it comes to lending money to borrowers. But aside from determining the financial profile of a loan applicant, lenders also want to know that the property being purchased is a standard one. That means lenders would typically lend you money only if you buy a house, townhouse, or even a vacant land. That also means that duplexes and studios might not be included in the lender’s list of standard properties.
- If you choose the right location. Aside from the property type, lenders might also be strict when it comes to location. Locations typically covered include capital cities and major towns. Thus, if you are planning on buying a property in a remote place, then you might need to shop a bit harder to find a lender who would be willing to offer you a loan.
- If you earn a healthy income. Any lender would want to make sure if you will be able to afford your repayments. So if you currently do not have considerable savings, but earn more than enough to take out a loan, then you have better chances of having your application approved. Of course, you would need to show proof of your income and employment, plus other lender-specific requirements. We recommend that you inquire from the lender directly about documents you might need to submit.
- If you are a professional. As a professional, lenders naturally aim to attract you. The reason for this is obvious enough: professionals earn more than the average Australian, and thus have a better capacity to pay their debts. Doctors, lawyers, and accountants, are just some of the more popular professions that just might provide you not only with better chances of an approval, but also better rates when it comes to your loan. Being a professional is not required of you, however. All you need to have to start with is to demonstrate to lenders your capacity to repay your loan.
Let us say that you are indeed eligible to take out a no-deposit home loan. Your work does not stop there. As with other types of home loans, you need to make sure that you are getting the best deal from your lender of choice. When you do this, you make it easier on yourself to repay your mortgage, and aside from that, leave more money in your pocket since you will be able to save in the process.
On this page, you will see a rate comparison tool. Using this tool, you will be able to determine which among Australia’s top lenders provide the best rates when it comes to home loans. It is easy to get started. Simply enter the required details and then click on the “Compare” button. From there, we will send you to a page where you will be able to see rate comparisons of over 30 Australian lenders.
Please note that the rates you receive are only rough estimates based on the details you provided. To get more accurate figures, you would need to talk to one of our qualified mortgage brokers. But if you are only looking to get estimates for now, use our rate comparison tool on this page.