Finance is always a hot topic. Over the last few years, we’ve seen the price of living skyrocket while wages have stagnated. For many that means less (if any) savings in the bank.
So, what if you’re looking to build your dream home? If you approach a bank, they’ll generally lend you 80% of the property value and you have to cough up the other 20%. Sounds reasonable right? But if you’re spending $500,000 on a house and land package, that’s a $100,000 deposit. Who’s got that kind of cash sitting in the bank?
Thankfully, there are other options, including ‘no savings home loans’ or ‘low deposit home loans’. Rather than having to outlay 20%, you may only need 1%, 2% or 5% for a deposit – a much more manageable and realistic option.
While a lower deposit means you can get into a home sooner, there are some reasons people shy away from no savings home loans. Let’s dig a bit deeper and find out if a no savings home loan is the right loan for you.
How a No Savings Home Loan works
Before you can apply for a No Savings Home Loan there are a few qualifying questions you’ll need to tick off.
✅ I am at least 18 years of age
✅ I am a permanent Australian resident
✅ I am up to date with all monthly loan repayments
✅ I am employed and earn a gross annual income of at least $50,000
✅ I don’t have any defaults or bad credit history
If you do qualify for a Low Deposit or No Savings Home Loan, you’ll then be separated into further categories.
If you classify as a first homeowner, you can apply for, and use, the First Home Owners Grant towards your home deposit. You’ll be surprised at how even a 5% deposit can make a big difference to your overall payments. Be sure to check whether your loan requires a parent or family member to go guarantor on your loan. A guarantor is basically extra security for the bank and can sometimes be required for a no savings home loan.
If you are a current homeowner and are considering building an investment property, some no savings or low deposit home loans may not apply. Talk to the team at InReach Finance to find out which loan option is best.
It’s important to note that while the banks may reduce their usual 20% deposit for your home loan, they could insist you pay a one-off fee to protect themselves. This is known as Lenders Mortgage Insurance (LMI). This fee can add thousands of dollars to your loan amount and will only benefit the bank should you be unable to make your repayments. Make sure you ask about LMI when you are applying for your home loan.
How to apply for a No Savings Home Loan
If you’ve ticked off all the qualifying questions, the next step is to talk to a lender. This could be a bank or an independent finance broker. If you’ve never had a home loan before and you’re building your first home, it’s good to talk to someone who specialises in lending for construction homes.
Using a lender that knows the construction industry and how mortgage payments work can help you in the long run.
- There is no alliance with any bank or lending institute – it’s all about getting you the best interest rate and term loan.
- A home construction specialist knows you don’t need to pay a builder up front and that payments are made in stages throughout the build.
- They work closely with the builder and do a lot of the leg work for you. This includes managing your finances, so you only pay the builder when it’s needed.
If you’re ready to build your dream home now, talk to Blueprint Homes’ exclusive finance division, InReach Finance. Whether you have some deposit or no deposit, the team at InReach Finance will help you find the perfect loan.