Struggling to find or save a deposit?
At Progressive Loans, we can locate a lender whom may have the right solution to enable yourselves to get into your own home sooner rather than later.
There are some lenders out there willing to accept applications from people who only have a small deposit saved. This is great news for first home buyers, but also for those on a tight budget who can’t manage to save the huge deposit amounts some banks want to see.
Why do you need to save a deposit?
Some banks insist on seeing that the deposit amount you have is genuinely saved. This means they want to see evidence of regular savings deposits going into a savings account towards building up your deposit over time. Usually, they’ll ask to see your savings account statements to verify this.
Lenders want to ascertain what level of financial responsibility you have before you get into such a large, long-term debt. After all, if you can manage to pay your living expenses and still find the discipline to put money aside each week, they have more confidence that you’ll do the same thing when it comes to making your mortgage repayments on time.
How much deposit do you need?
One of the biggest traps many home buyers fall into is saving a big enough deposit to purchase a home, but they completely forget to put aside enough money to cover the rest of the fees and charges associated with buying a home.
For example; your bank may ask that you have a 5% saved deposit. This means you’ll need to put down at least 5% of the purchase price of the home, while they lend you the remaining 95% of the price.
So if you buy a house for $300,000 you will need a $15,000 deposit.
DID YOU KNOW?
Borrowing 95% of the property value means that yes lenders mortgage insurance may be payable, or a risk fee may be payable. This is a fee that your bank’s insurer charges them for lending you money above the usual safety threshold of 80% of the property price. You only need to pay this fee once. Unfortunately, it can often add thousands of dollars.
Some banks will let you capitalise your lenders’ mortgage insurance (LMI) or the risk fee on the top of your mortgage amount. So, they’ll lend you 95% of the purchase price of your new home, plus an additional 2% to cover the LMI or risk fee.
There are also government fees and charges to account for. When you buy a home you will need to pay stamp duty. This is calculated differently for each state, so it’s worth checking on a good stamp duty calculator how much you’re likely to pay based on the amount you’re paying for your home.
Don’t forget to add in things like legal fees, conveyancing fees and transfer fees to your total. We can work all these out for you free of charge. It’ our pleasure!!
First home buyers may be able to get a little assistance here with the FHOG adding some assistance to your first home purchase.
Can anyone get approved for a low deposit home loan?
Can you borrow some of your initial deposit, or make up the funds to complete the purchase transaction?
While the banks might advertise that you can borrow up to 95% of the purchase price of your new home, it’s important to realise that lending criteria still apply.
Good credit history
In order to get your loan approved at a high LVR like 95%, you will need to have a clean credit history. This means you should have no defaults showing on your credit report for missed payments on other bills.
This is the case in most circumstances, but not all; which most consumers may not be aware of.
Progressive Loans is here to assist you in finding the right solution to your home loan needs. Enquire here.
Terry, your friendly mortgage broker.