Are You Eligible for a Low Deposit Home Loan?
Homeownership is a goal that most of us strive for. But saving enough money to buy your first home can seem overwhelming when you’re also paying rent and you’ve already cut down your living expenses as much as possible. Luckily, there are solutions out there – especially if the only thing holding you back from owning a home is not quite having enough cash in hand just yet.
It’s no secret that most lenders don’t offer true “no deposit” home loans. However, there are a few options available, provided that you’re able to meet the strict criteria for eligibility (which includes an almost unblemished credit score and very steady employment history, not to mention an expensive interest rate).
Low deposit home loans are a far more popular option, as they are much easier to meet the requirements for. Let’s address the elephant in the room – yes, it’s possible to get a home loan without putting down 20% of the property value upfront. In fact, some lenders offer loans of up to 95%, so you might be more eligible for a low deposit home loan than you thought!
How do low deposit home loans work?
Whether you’re located in Melbourne, NSW or elsewhere in Australia; low deposit home loans allow you to get your foot in the door (literally). The “loan to value ratio” refers to the amount an applicant borrows from the bank, relative to the overall property value of the home they are purchasing.
The higher your loan to value ratio (LVR), the bigger risk the lender is taking. If your LVR is greater than 80% (meaning you wish to borrow more than 80% of what the property is worth), there’s a good chance your lender will charge Lenders Mortgage Insurance (LMI).
This protects the lender in the event that you’re unable to make repayments on the house. While no one wants to pay LMI of course, it isn’t necessarily a bad situation for first homebuyers with a low deposit to be in.
Applying for a low deposit home loan for first home buyers
When seeking a low deposit home loan, the trick is to have good financial records, and a well-worded explanation (to both the lender and the insurer) for why you wish to buy a house with a smaller-than-usual deposit.
At BFG Loans, we know how to navigate these applications and secure a low deposit home loan with the best possible outcome. We can also help you prepare for the additional expenses that inevitably pop up when buying a home, so that you’re not caught off-guard or left short on funds.
Speak to a friendly and professional BFG Loans broker today
At BFG Loans, we’re committed to helping you secure a home, while securing one for a family in need at the same time. Once we’ve found the ideal low deposit home loan for your individual circumstances from the 35+ banks and reputable lenders we work with; we contribute 50% of our profits to affordable housing for families in need.
It’s all part of our mission to create a better future for our customers, communities and the planet. To speak with one of our brokers about your options today, get in touch.