No Deposit Home Loans
Most potential home-buyers fail to understand the definition of a ‘no deposit’ home loan. Believing lenders provide all the money required for the purchase, they think they have nothing to pay up-front and can move straight into their newly acquired property.
The reality is that the loan covers the cost of the property only, not associated items such as 2% to 3% of the purchase price for stamp duty, 2.5% of the loan amount for mortgage insurance and legal fees of around $1,500. In total, a further 6% to 7% can be added to the purchase price.
Based on a modest $350,000 home, the extra money to be found would amount to:
Non-first home buyer $29,174.
First home buyer $9, 593,
The difference is due to the First Home Owner Grant and stamp duty.
New loan products are currently being introduced that focus on the borrower’s income and ability to pay rather than savings. While overseas the LVR has been as high as 120%, here in Australia the maximum is 107%, enabling buyers to borrow the full purchase price plus some, or all, the associated costs.