General Advice for Buying a Home with Little to No Deposit

Advice for Buying a Home with Little to No Deposit

Buying a home is a significant part of the average Australian dream. At Home Loan Cash Back, we devote our considerable experience in the world of mortgages, to help you find the loan that best suits your needs, and ensure that you can afford each repayment with ease. On top of that, you get access to cashback too, thanks to our ability to share our rolling commissions with you.

Of course, buying a home isn’t always as easy as it should be. In fact, a lot of people find that they struggle when it comes to finding the money to afford that first big payment – the house deposit. The good news is that while many young buyers still believe that they need at least 20% of the purchase price to make a deposit, there are actually ways that you can buy your first home with little or no deposit whatsoever.

Understanding the Deposit: What You Need to Know

If you’re buying a property as a single person, or a couple, then you’re going to need a minimum of 5% to place down as your purchasing price deposit. This 5% is known to mortgage insurers as “hurt money”, and it helps a bank to determine whether you are financially responsible enough to make your repayments each month.

A mortgage is a big commitment, so most home loan companies will want to see your statements from your savings account for a period of at least three months, to show that you have been disciplined at holding back money. The account balances should have begun to build up, or at least hold steady over this time.

Of course, if you haven’t been able to save very much because you’ve been paying rent each month, you can still show that to your advantage. Simply provide your lender or mortgage insurer with evidence that you’ve been paying rent through a real estate agent to show that you’re disciplined when it comes to making monthly payments.

Turning to Family for Help

Another option for getting your hands on a home before you’ve had chance to build up a large deposit is to turn to your family for help. Parents can either give you a cash gift that you can use towards their deposit, or they can offer the property that they own as a kind of security to help improve your chances of getting a purchase offer.

In most cases, a bank will be willing to accept equity in the form of the family home in lieu of a cash deposit, as they have something to claim if something goes wrong. The upside to this process is that you won’t need any mortgage insurance, which can help you to save some money on your home purchase. Of course, the downside is that you’re locking your family into your mortgage with you until you’ve paid enough down on the loan, or the mortgage property rises.

With this option, you can sometimes buy a property with no deposit at all, but there are risks to think about. You’ll still need to make sure that you understand your budget thoroughly before you get your home, and determine whether you can afford to make monthly repayments according to your term agreement. If you can’t, then you risk not only losing your property but causing serious problems for your parents too.

Getting a Home with Minimal Deposit

As you can see from the information above, there are options available for people who are looking to buy a home with little or no deposit. However, before you make a decision on what’s right for you, it’s generally a good idea to talk to a financial professional and mortgage broker. At the end of the day, the more of a deposit you can make, the safer you’ll be.