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No Deposit Home Loans. Do they still exist?
No Deposit Home Loans. It's all about buying now in a buyers market!
The most common enquiry we get is asking how to apply for a home loan with little or no deposit or vendor finance.
Many clients recall a few years back when every bank seemed to have a no deposit home loan and in fact some bank’s had like 105% options!
Of late we have had increasing enquiries regardingbuying a home with a gifted deposit and also vendor finance from family, friends or a supporting landlord.
Now the only 100% product that we are aware of, on a stand alone basis, is the Governments Welcome Home Loan. We believe this is capped at $200,000 and after that you do need some deposit. There are also income restrictions on this product. We do not generally arrange these as most of our clients seem to be outside the qualification guidelines. We can give you some advice though on this.
NOTE: Sometimes you can access funds in your KiwiSaver account to assist with a deposit. It is important to realise though that this may have an impact on your longer term savings. This should be discussed with your KiiwiSaver 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, 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 5% of your own savings is the minimum required to apply for a home loan, if you are not quiet there once again check to see if you have funds available in your KiwiSaver. If not you may need a little help from a family member or friend as referred to above. Just remember non genuine savings from sale of a car or a gift are now OK providing your other personal details such as occupations and credit ratings are good.
But if you have 5% there are a few options available, each lender has it’s own quirks on qualifying criteria which include your residency status, time in jobs, length of time savings have been in your account and even how and where you spend your money, which often shows so clearly on your bank statements through using Eftpos and ATM machines.
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!
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 $350 per week and you know that your mortgage may be closer to $500 per week, how will you find the extra $150? Best idea is to start saving at least that amount weekly as soon as possible.
So whilst the good news is that there are ways to help you buy a home with little or no 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.