We understand how stressful and time-taking it can be to save pennies for your future home. It voids some precious years of your life and stops when you grow old. So why not spend your best years in the house of your dreams? We can show you how to buy a house in Melbourne with no deposit.
Yes! That’s actually possible! You won’t have to look for apartments for rent in Melbourne anymore. This article shows how you can get an investment property with the least deposit.
Can I buy a property with no deposit?
It may seem that having no money in savings means no property whatsoever. But that’s not the case now. Fortunately, there are some authentic ways to get your own home with low or no-deposit home loans in Victoria. These involve getting a guarantor home loan, property equity, FHOG, and Family Home Guarantee.
There is a vast difference between renting versus buying in Melbourne. So, before you get into any loan method, remember that the process can be lengthy and challenging. Also, a low-deposit home loan is easier to get than no-deposit home loans. Whatever the individual circumstances, you must fulfil the conditions of lenders to get a no-deposit investment property.
Guarantor home loan
The guarantor family pledge loan works when your immediate family member has a property through which they can put up security for your new property. A guarantor can only be your family members, like your parents, grandparents, or siblings.
In the past, people had to get a significant ratio of security from their guarantor. Now, lenders require only 20% of that. With this 20% term deposit as security, you can get a 100% home loan for your new property with a low-interest rate.
A guarantor loan is the most common low-deposit home loan for the following reasons;
- You provide 20% more security through another property while the 100% loan is already secured by your property. It gives the lenders more reasons (120%) to lend you money.
- If you pay 20% debt or your property value goes up, you can remove the guarantor’s property from the loan. Thus, only your new house will be left as the security for the home loan.
Equity home loan
This method only works if you already have home ownership for another property. Suppose you have your own home, holiday house, or business property, and its purchase price has increased over the years. You will have positive equity if your current debts for the house are less than its total worth. In that case, you can get the existing equity from your property and use it as a home loan deposit.
All you have to do is contact your mortgage broker, borrow the equity money and deposit it in your new property. The only downside of this loan is that you will have to pay two lenders simultaneously.
Government home loan schemes
First home owners grant (FHOG)
First Home Owners Grant (FHOG) is provided to first-home buyers on their new property. In Victoria, its value is $10,000. Although you can surely use this grant in your home deposit, the amount may barely cover 5-10% of your property value.
As you require at least a 20% minimum deposit for your new property, you cannot entirely rely on FHOG. You must have other sources to make the house deposit up to the mark and not pay LMI (Lenders Mortgage Insurance). Thus, this method may only help in low-deposit home loans.
Family guarantee home loan
This home loan deposit scheme only applies to single parents having no property under their name. With a Family Guarantee, you will only have to cover 2% of the deposit; the state government will cover the remaining 18% guaranteed amount.
There is no requirement to be first-time buyers for this personal loan. However, you must be above 18 years, have at least one child under your care, and have a maximum taxable income of $125000 to apply for this scheme.
How to get your no-deposit loan approved? (lending criteria)
- Show proof to your lenders that you can repay the debt soon with a solid financial situation
- Your credit history must be great, and the credit score must be good
- You must have stable employment with a good income at the time
- Your Guarantor must have sufficient equity in his property, and it should be in Australia
Cons of no-deposit home loans for home buyers
- You may feel mental pressure associated with extra repayments and the high home insurance rates in Melbourne
- For deposits less than 20%, the home buyer will have to pay Lenders Mortgage Insurance (LMI)
- Some Australian lenders charge high-interest rates on such enormous loan amount
- The loan approval process can be lengthy and require multiple documentation
