So you’ve just been given a promotion, you’re earning great money but you haven’t saved your 8 to 10% deposit to buy your first home… Is that the end of the road or are there other options available?
Lucky for you we can still help get you a loan with no deposit! There are different options including the First Home Owners Grant, different government concessions and a few different 100% home loan options so its actually surprisingly easy to buy your first home without having saved a deposit.
Practically these are:
- Funds gifted from parents or relative
- Parental or family guarantee using another property
- Using the first home owners grant as a deposit
How do gifted funds work?
The banks generally require an 8% to 10% deposit. So, if your parents were happy to give you a cash gift for this deposit amount it would be enough to help you get into your first home!
But…There’s a few things that the banks look at when allowing a gift.
Are there any catches with gifted funds?
One is they might want to see your rental history – showing you have a history of making regular repayments on time, which gives the banks extra comfort that you’ll be able to afford your new loan. Ultimately it is their way of seeing you have some sort of skin in the game yourself towards your new home!
Also it always helps if you have a little of your own savings which can be used towards the purchase, because you have saved these funds yourself they are known as genuine savings.
Can my parents help me with their property?
The second option is a parental, or family guarantee loan.
You can borrow up to 110% of your new home’s value
This is something that’s quite popular with first homeowners because it allows you to get into your first home without any deposit – in some cases you can lend up to 110% of the properties value, helping cover stamp duty, conveyancing and other costs.
You can avoid expensive lenders mortgage insurance (LMI)
The other added benefit of a parental, or family guarantee loan is you avoid expensive costs like lenders mortgage insurance because the bank is taking a second property from your parents as security for your mortgage.
You qualify for a lower interest rate
The benefit of this structure too means you can still qualify for a lower ongoing interest rate as the additional security offered by your parents means that you are a lower risk to the bank compared to someone say that is borrowing 95% of the property value. Realistically if your job history, income and credit score are all acceptable to the bank you could be an ideal borrower to the bank!
Longer term with a guarantor loan
Really the only downside is that a family guarantee loan is mostly a short term strategy, as you ultimately want to remove your parents property from your loan within 2 to 5 years of buying your new home – really depending how your property value is going, and also how much of your loan you have paid down.
Can I use the first home owners grant as a deposit?
In some states you may qualify for the first home owners grant (FHOG) which means you might be able to access up to $20,000 towards your new home – but can you use this first home owners grant as a deposit? Fortunately yes you can!
There is some criteria you need to meet to qualify for the first home owners grant (FHOG) but in Queensland depending on when you sign your purchase contract you can get $15,000 or $20,000 towards buying or building a new home, unit or townhouse provided it is valued less than $750,000.
- 18 years of age or older
- An Australian citizen or permanent resident
- You or your spouse have not previously owned property in Australia
- You’re building or buying a new home (not an investment property)
- The value of the home is under $750,000
For more information on the first home owners grant check out the Queensland Government website.
In the following scenario, if a first home buyer was buying a property in Queensland for $500,000 using a 95% loan they would only need $13,550 in savings!
What does this all mean in short?
In short this all means its good news for home buyers that might not have saved up enough deposit to buy their first home.
You may not need the 8% to 10% deposit provided you can get the deposit funds gifted to you, or your parents can help with a guarantor loan or if you qualify for the first home owners grant!
It’s all going to depend on your situation, so its best to chat with our team to work out which structure is going to fit best with you.
Help this is all confusing
If you are a first home buyer speak with one of our experienced mortgage brokers to walk through the next steps with you.
At Hunter Galloway we help first home buyers get ahead in this competitive market, we give you the actual strategies that have helped other first home buyers like you secure a property when there have been 5 other offers on the table! Enquire online or give us a call on 1300 088 065