First home buyers with little or no deposit probably need a guarantor

Regulations have tightened and the mortgage insurers who carry all of the risk in this type of loan are the ones who dictate how much deposit you need to have.

But you can avoid the mortgage insurers ( LMI ) entirely by using a guarantor, this not only saves you a lot of money in LMI premium but avoids the requirement that you can show 5% of genuine savings in your bank account. For more information on this see our page on guarantor home loans

If you are not lucky enough to have a guarantor things become a bit more difficult and this is because the LMI is involved and many state governments have changed their first home buyers assistance. This may mean that you have to pay stamp duty – you can’t borrow the money for stamp duty as this would mean you are borrowing more than the house is worth. So depending on your state you may need as much as $4,000 for every $100,000 of the purchase price eg: $350,000 purchase stamp duty is almost $12,000 in NSW. Then there are other costs associated with your home loan while some of these can be included in your loan they can only be included if your deposit is sufficient to keep the total loan below the value of the home ie: 100% LVR.

For most lenders you will require 5% of the purchase price and for most lenders this must be genuine savings ie: money in your bank account for at least 3 months. Money from the sale of cars, boats or motorcycles are not considered genuine savings. Neither is tax return, bonus or a gift from your parents.

However there are exceptions

We have a few lenders who will lend 95% plus mortgage insurance without genuine savings and this means you can sell your Ducati or wedding dress and use these funds. Or we also have a few lenders who will waive the need to show genuine savings if you can show that for the last 12 months you have been renting a property and you have been paying rent through an agent without any missed or late payments. Again in this case your deposit does not have to be genuine savings, it can come from anywhere including first home buyers grants if available to you.

This is an area of lending that is constantly changing – at the moment things are a little easier than they were so stay in touch as something perfect for you may come up. Meanwhile start saving like mad – it will save you money in the long run.

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