No deposit home loans or 100% home loans don’t technically exist anymore in Australia. They were phased out following the 2007/2008 Global Financial Crisis (GFC). The most lenders will allow you to borrow now is 95%, although one Perth lender will allow up to 98% - see Keystart Home Loans.
However, depending on eligibility, there is now really only one real way to get a home loan without a deposit, and that is via a Guarantor home loan.
A Guarantor home loan is one in which a guarantor provides a guarantee for your home loan, which is secured against their home or property. These types of home loans can enable you to borrow up to 105% of your total home purchase price. Most frequently it is the parents that act as guarantors, but other family relations may qualify as guarantors too.
Guarantor home loans have become a popular choice for first-time buyers in Perth due to the very high property prices.
Guarantor Home Loan Advantages
- Get onto the property ladder fast by avoiding the time required to save for a deposit - this can be useful if property prices are increasing fast.
- Avoid paying Lenders Mortgage Insurance (LMI). Here is an example: Steve & Julie are planning to purchase a $500,000 home with a $25,000 deposit (Loan to Value Ratio (LVR) of 95%), which means LMI would be payable. If John’s parents agreed to act as guarantor and provide a guarantee of $75,000 as an additional security, the LVR would then reduce to 80% and save Steve and Julie at least $15,000 in LMI premiums.
- Some lenders enable you to borrow 105% of the property price to cover property fees such as Stamp Duty, settlement fees etc...
Guarantor Home Loan Disadvantages
- As you have borrowed more, your repayments will be larger than if you had only borrowed 80% of the property price.
- There can be additional legal and document fees given the extra parties involved.
Want to talk more about your home loan options?
If yes, then please get in touch with me today and I'll be happy to help. All my home loan and mortgage services (from the initial meeting, right through to home loan settlement) are completely free to you.