Low Deposit vs. No Deposit

• Low-deposit home loan
  • Designed to get you into your new home sooner by allowing you to purchase a home with a deposit as low as 2% of the property value.
• No-deposit home loan
  • A home loan where you get approved for 100% of the property value, meaning you don’t have to pay a deposit.

Low-deposit loan – lending criteria

• A good income
• Loan purpose
• Property
• Clean credit file
• Genuine savings usually required
• Reasonable asset position
• Reliable, long-term job
• Low level of debt

No-deposit loan – lending criteria

• Credit history
• Repayment history
• Location restrictions
• Property type
• Stable employment
• Income
• Profession

3% – 5% deposit

• One of the problems with a 3% deposit home loan is that although you don’t need a big deposit, you still need to have 5% in genuine savings.
• There are other options such as a gift from your parents, First Home Owners Grant (FHOG), or a personal loan.

5% deposit – Pros & Cons

• Pros
  • You can become a homeowner sooner.
  • Various government schemes are available to help you buy a home without paying Lenders Mortgage Insurance (LMI).
  • You can start building wealth and equity in a property.
• Cons
  • Some lenders may charge higher interest rates for low-deposit home loans.
  • Government assistance schemes often have limited places available.
  • If property prices decline, there is a risk of falling into negative equity.

5% deposit – First Home Buyer

• Apply for any of the guarantees under the Home Guarantee Scheme.
• Use a shared-equity scheme.
• Apply with a lender that approves 95% Loan-to-Value Ratio (LVR) home loans.
• Use a guarantor.

Home Guarantee Scheme is the Australian Government’s initiative to support eligible homebuyers who want to buy a home with a smaller deposit. The greatest benefit of this scheme is you don’t need to pay Lenders Mortgage Insurance (LMI). LMI is usually applicable when your deposit is less than 20% of the property price. There are three types of guarantees under this scheme:

• First Home Guarantee: Eligible homebuyers can purchase their first home with at least a 5% deposit
• Regional First Home Buyer Guarantee: Eligible first-home buyers can purchase a home with at least a 5% deposit
• Family Home Guarantee: Eligible candidates can buy their home with at least a 2% deposit

Shared-Equity Scheme are another way to qualify for a 5% deposit without paying LMI. These arrangements involve an equity partner, which can be the lender or a third-party investor, like the government. They typically contribute a portion of the property’s purchase price in exchange for an ownership interest. Some popular shared-equity schemes in Australia are:

• Help to Buy Scheme: This scheme allows eligible homebuyers to purchase a home with a deposit of at least 2% of the property purchase price, through an equity contribution from the federal government.
• NSW’s Shared Equity Home Buyer Helper: The NSW Government has its own shared-equity scheme that helps eligible applicants buy with at least a 2% deposit. The scheme is available to single parents with dependent children, single people aged 50 or above, and first-home buyers who are employed as key workers.
• Victorian Homebuyer Fund: This shared-equity scheme helps eligible applicants buy a home with at least a 5% deposit. The Victorian Government will make a financial contribution toward the purchase of the home in exchange for an equity share in the property.

Guarantor Home Loan is a great option if you have parents who own property in Australia. You don’t even need a 5% deposit if your parents can act as guarantors on your home loan. As a guarantor, your parents will put up their own home as security on your home loan. There are risks and benefits involved with getting a guarantor or being a guarantor on a home loan. It’s best to consult with an expert to see if a guarantor home loan is a viable option for you.

Property purchasing costs

• Minimum of 5% deposit
• Stamp duty
• Property title transfer fee
• Registration fees
• Conveyancing fees
• Inspections including building/strata and pest
• Home loan set up fees
• Lenders Mortgage Insurance (LMI)

Property selling costs

• Agent Fees
• Marketing Costs
• Conveyancing Fees
• Capital Gains Tax (CGT)
• Presale Repairs and Renovations
• Styling/ Home Staging
• Auctioneer’s Fees
• Lender Fees
• Moving Costs