No deposit home loans
Are no deposit home loans still available? Yes, you can still qualify for a home loan with a nil deposit. If you are looking to purchase a house with no deposit, there are multiple options available.
A no deposit home loan is essentially a loan where you don’t have to contribute anything to your new property purchase.
Option 1 – Guarantor Loan
This is the most common form of nil deposit home loans. A guarantor (quite commonly an immediate family member) places their property as security (in addition to your new place) which allows you to seek a no deposit home loan. In terms of structuring;
80% of the required loan will be in the borrower’s name and secured by the property being purchased.
20% (plus associated costs if required) will be in the borrower’s name, guaranteed by the guarantor (quite commonly an immediate family member) – secured by both the guarantor’s property, as well as the property being purchased.
This structure minimises the exposure to the guarantor’s property and is known as a limited recourse loan. As there is limited recourse for the lender, as the guarantor is only guaranteeing 20% (plus any costs) of the overall loan.
Advice and structure may change depending on your lender and individual circumstances. We can talk you through this.
A couple of things to mention;
- The guarantors’ must have equity in their property
- Guarantors’ should be working, or is a self-funded retiree (no government pension etc)
- Guarentors’ property must be in Australia
- Guarantors’ should have liquid assets to cover the guarantee – this will limit the risk of the transaction
Option 2 – Using Equity as a Deposit
This is another form of common structure, where you can simply;
- Offer your existing property as security (in addition to your new property).
2. Increase your existing home loan to fund your new property purchase.
You will need to ensure that you have sufficient equity in your property – we can chat to you about this.
Option 3 – Gifted Home Deposit
Whilst I can imagine, it can be sometimes hard for a child to ask their parents for a large gift, this is a very common approach.
What option is best for me?
This is a hard question to answer, as it really depends on your individual circumstances. Whist guarantor loans seem like the easiest options, there are obviously risks involved for all parties. Talk to us to see which option is best for you!