The most common enquiry we get is asking how to apply for a No Deposit Home Loans with little or no deposit or vendor finance. Many clients recall a number of years back when every bank seemed to have a no deposit home loan and in fact some banks had up to 105% options! Even up to March 2017 we still had 100% Home Loans up to $250,000, available for areas outside of Auckland and Hamilton.
Of late we have had increasing enquiries regarding buying a home with 80 % - 90% finance, using gifted deposit and also vendor finance from family, friends or a supporting landlord. Interest rates are still low and first home buyers are concerned that prices on properties outside the traditional hot spots are also now starting to increase.
Whilst there was once the 100% Government Welcome Home Loan, even this has now changed and requires a 10% deposit. There are also income caps and maximum loan amounts on this product. We are still helping first home buyers with Welcome Home Loans, but most of our clients seem to be outside the qualification guidelines. We can give you some easy to understand advice though on this.
THE BEST NEWS is, we are still having 90% Home loans approved and savings from your KiwiSaver and HomeStart grant can be used as all the deposit. Please note that stable employment record, good bank account & credit history will be a requirement, plus Lenders usual terms and conditions.
NOTE: When you choose to access funds in your KiwiSaver account to assist with a deposit, it is important to realise that this may have an impact on your longer term savings. This should be discussed with your KiwiSaver provider or Authorised Financial Adviser. As a Registered Financial Adviser I am unable to advice on investment products.
So, with regards to home loan options, the most common enquiries and solutions are a follows:
“We have found the perfect house and we were just planning to start saving, but now want to buy with no deposit”
The first thing is to check if you have funds that can be accessed in your KiwiSaver, if not, or these are insufficient, depending on the price, you will need the help of family or friends, either through a gifted deposit or by them providing additional security for the lender and becoming guarantors. Both of these are serious commitments by a family member and / or friends and independent advice should be sought from a solicitor or trusted professional. If you have someone who is able to help you, the next step is to contact us and we can help you. Our online enquiry form can be used to get a quick idea on what may work for you.
“We have some savings but our bank will not help us and we have been customers for years! They say we need a 20% deposit!
Ideally 10% deposit, of which 5% is your own savings, is the minimum required to apply for a home loan, if you are a little short, once again check to see if you have funds available in your KiwiSaver. To get to 10% you may need a little help from a family member or friend as referred to above. Just remember using some non genuine savings from sale of a car, a personal loan, a gift, or guarantor are all possible, providing your other personal details are strong, such as occupations, credit ratings, account conduct, plus you have 5% genuine savings. With 10% we may also be able to arrange a mortgage to 80% and a secured personal loan for another 10% as often Banks have limited funds for 90% loans with the current Reserve Bank restrictions.
You may think there are no more options but contact us, as we make it our business to know what loans work with which lenders and who has funds available!
Some guidelines for you to think about if you want to apply now, or maybe you have to wait a few months.
1/- Have you been working for the last 12 months with the same employer?
2/- Do you pay your credit card and any other commitments like HP and rent on time, each month.
3/- Do you make sure that your bank account does not go overdrawn and have any honour or dishonour fees?
4/- Is your reason for having little or no savings your current lifestyle? Check your statements to see how much money you spend on coffees, lunches, entertainment, takeaways, bars and restaurants?
5/- Have you got too much debt already, car loans, HP and credit cards which have continual high debts on them. These items can all severely impact on your ability to buy a first home, perhaps you need to rapidly pay off some debts first, so you develop the habit of budgeting and saving.
6/- Know where your money goes, do a detailed budget. If your rent is currently $400 per week and you know that your mortgage may be closer to $600 per week, how will you find the extra $200? Best idea is to start saving at least that amount weekly, as soon as possible.
So whilst the good news is that there are still ways to help you buy a home with a low deposit, it can be difficult and lenders are really careful who they lend to.
Keen to find out more? Just contact us by phone or our online enquiry form.