100 Percent Home Loans Require a Guarantor
The Global Financial Crises was sparked by the US Sub-Prime Crisis ie: lending to people who had no deposit. When property prices fell these people owed more than their properties were worth so they just walked away leaving the banks with worthless property. In Australia all lender's must cover their risk when it exceeds 80% of the loan to value ratio (LVR) and they do this with LMI (see below). Almost all lenders use one of one of only two insurers and while things have improved the insurers are very strict when it comes to this type of non-prime lending. If you have a guarantor you can avoid these restrictions otherwise most lenders require 5% genuine savings. If you have no genuine savings eg: your deposit is an inheritance, then you have to have sufficient deposit from other sources for at least 5% plus cover stamp duty and LMI ( allow 8% ). And please understand that lenders base the LVR on the purchase price or valuation - not the total cost which includes stamp duty, fees and LMI (lenders mortgage insurance).
If you are an investor and looking for 100% investment loans click here .
if you aren't entitled to FHOG or if you have to pay stamp duty then you have to take that cost plus all other costs into account. Remember the LVR is based on the purchase price written on the contract - not the total cost. Then there is LMI (lender's mortgage insurance) and on loans like these you better allow 3% and for larger loans 4%. Then you need a conveyancer allow $1300, house and contents insurance, moving costs, utility connections and deposits and probably pro-rata council rates - let's say another $4,000 or $5,000.
There is a way to borrow without any deposit
The only way to borrow 100% of the home loan amount is where a family member (usually parent) as guarantor can offer a suitable security property as part of the home loan, these loans are sometimes called 'family equity' etc - as long as the offered security brings the overall borrowing down to below 80% then there is no genuine savings requirement and no LMI payable potentially saving you thousands of dollars.
So if you don't have a deposit or a guarantor I am afraid that 100% home loans are like the Tooth Fairy, a mythical memory from the distant past. If you are new to the home mortgage market you need the help of a professional mortgage broker and why not read our free beginners guide to home loans.
Click here to go to our express inquiry or call us now on 1300 137 586. We're confident you'll appreciate the Peach Home Loans service!