| No-deposit home loans may seem like an impossible | | | | help of a no deposit home loan secure the home with |
| dream in this market. Current conditions for borrowers | | | | literally no deposit. |
| and for lenders may appear tight when you read all | | | | The no deposit loan can be a win-win for everyone. |
| the headlines but the world has not stopped. | | | | You can - finally - get into the real estate market and |
| Before the Global Financial Crisis no-deposit loans | | | | for the guarantor there is limited exposure to risk. |
| were just another mortgage product. They were used | | | | Parents acting as guarantor for their children wouldn't |
| by people who had not saved the 20 per cent deposit | | | | have to pay any repayments. Furthermore, the |
| that traditional lenders require before offering a | | | | guarantee can be retired at any time and the |
| mortgage and buyers who can demonstrate that they | | | | borrower is not required to pay expensive mortgage |
| have the capacity to service the mortgage. | | | | insurance. |
| Pity the poor souls in the USA who are now being | | | | There's more to these little understood products: they |
| dispossessed of their homes after being sold | | | | are not limited to first home buyers. Investors are |
| unaffordable mortgages, many of them no deposit | | | | frequent users of no deposit loans. Deposit bonds can |
| home loans. Of course many of those borrowers | | | | be issued by a lender against for example cash |
| were not suitable applicants for any home and many | | | | deposits or some of form of funds that the insurer is |
| purchased houses that were over-valued in the first | | | | prepared to accept as security. A deposit bond can |
| place. | | | | be used, where applicable to the lender, for no deposit |
| No deposit home loans do exist but they may require | | | | loans as the deposit required to secure a property. A |
| a guarantor for the deposit component of the | | | | deposit bond requires another asset that can be used |
| mortgage. The guarantee is limited to the amount of | | | | as collateral, for example a house or land. |
| the deposit. This is very significant as it gives peace of | | | | It works in a similar way to a conventional no deposit |
| mind to the borrower. Further, all the guarantor requires | | | | loan; the difference being it is usually an investor with |
| is to have sufficient equity in their own home. | | | | other assets, that is, the buyer. |
| Each mortgage lender will have their own criteria but, in | | | | The ability to buy on no deposit is not without its risks |
| theory a no deposit loan requires a guarantor, for | | | | of course. The loan repayments need to meet the |
| example a parent or sibling, or a guarantee limited to | | | | borrower's capacity to repay. Any deterioration in the |
| the 20 per cent deposit requirements. | | | | value of the home will cause negative equity. That |
| If for example you are purchasing a house for | | | | needs to be considered. |
| $350,000, the "normal" deposit required would be | | | | So, despite the onset of the GFC, no-deposit |
| $70,000. For first home buyers who will be eligible for | | | | mortgages are still available under the right |
| stamp duty concessions and the Government's First | | | | circumstances. |
| Home Buyers Grant, the buyer can in fact with the | | | | |