No Deposit Home Loans [Do they exist?]


No deposit home loans, do they exist? Are they the unicorns of the finance world? We’ll find out today in our video to discuss
no deposit home loans and what your options are. Option #1 and I would say, probably the most popular way
of buying a home with no deposit today is through a guarantor home loan.
So Nathan, how’s that work? So practically speaking, a guarantor home loan
allows you to lend up to 105% of the property that you’re purchasing. It also means that you don’t need a deposit
and the way it works is we would actually put 80% of the purchase price on
the purchasing property in the owner’s name. So in other words, the property you’re buying,
the bank will put a good old-fashioned 80% loan against it. Sweet. So then what happens
to the other 20% or 25% leftover? The remainder goes on the guarantor’s property. So mum and dad’s property would have
a second mortgage registered on their property there. Okay. So basically what you’re saying is that
the deposit part of the loan goes against the old folks home and the bulk of the loan,
the 80% goes on my house and that means I can buy without a deposit. Yup and the best thing about it is the full loan,
you’re responsible for. So your mum and dad don’t have to make
any repayments and within a two, three, four-year period of time, the property you purchased
should hopefully increase in value, the loan should, of course decrease in value, and we can look
to remove that off the old folk’s home. Yes, so really, a guarantor home loan is
a great stepping stone into the property market. It means that you can get in today. They’re particularly good if you’ve got
a really strong income, really high income but you might be living in somewhere like Sydney or,
I guess anywhere in Australia where your rent is pretty high and you find it pretty tough to save up. A guarantor loan will help you get into that home. It means you can borrow 105% of property price,
so you can put no deposit down and cover a bit of the stamp duty and other costs and then
you can use your parents’ house as either deposit, be it in pay it down as quick as you can
and get into the home. And I think lastly, just remember, it is important
for you old folks to get legal and financial advice to make sure this is something that is suitable to them
because as you can appreciate in a worst-case scenario, the guarantor’s property could be
at risk in a foreclosure situation. So do get that advice and make sure it is suitable. Option #2, a gift. Yeah, this is another extremely popular option,
whereby if the old folks don’t want to put their property up,
they can give you a cash gift: $20k, $30k, $40,000. That thing can be used as a deposit to
purchasing a home. Yeah, so the cool thing with this is
it can be from relatives, it can be, I guess from friends, if you really want depending on the gift amount
but if they give it to you, that’s a sign of form that says, it’s non-refundable and then
they’re giving you the gift forever basically, and that can go in the home as your deposit. So that can make up your 5%, 10%, 15%, 20% deposit
and your way to the races. Option #3 and this is a bit of pretending it’s not real
is you would have, maybe seen this online and we kind of want it debunk it a bit is
using a personal loan instead of your deposit. Now this is something that was hugely popular
a few years ago, Nathan. It’s still on a bunch of websites today saying,
“Hey, go out and get one of those loans from Alec Oldburn for 30,000
and that’s going to be a deposit.” Why can’t I use it anymore?
Yeah, the banks used to allow a personal loan as funds to be used as a deposit.
Nowadays, that is a no-no. So unfortunately guys, you can’t do that anymore. If you do get a personal loan, the banks are likely
to find out, you know, the purpose and where those funds are coming from and as soon as they know
you’ve borrowed money towards your deposit, it’s game over. I think the other thing too it’s a bit tough for
a personal loan because they really murder your lending capacity, so the bank criteria is going to be
a lot harder over the last few years and personal loans, if you’re making a payment of
$500 to $1000 a month, it can actually reduce your lending capacity
by hundreds of thousands of dollars. So that is the other reason why, I think that’s sort of
a bit loose doing these 15%, 20% personal loans and then giving someone a house,
it’s too much, let’s get rid of it and don’t do it. So on its own, it doesn’t exist anymore. Sorry. Number 4 and this one doesn’t really apply
if you’re a first home buyer but it still applies if you’ve got an existing home is using equity
in an existing property. So Nathan, tell me about this.
So you don’t need any deposit, right? Yeah, this is the fastest way to borrow more money
because effectively, savings takes time, a property that you purchased three years ago
as that has increased by $300,000, well guess what? You can use that equity to leverage to purchase
in the next property. So it’s really neat, it’s a great way to be able
to expand your portfolio faster and without having to save the deposit. Yeah, I think the only trap that this one
is getting into too much debt. So just make sure you do your cash flow, make sure
you do your modeling to ensure that you can afford it because then you are borrowing 100% potentially
on the new property because you’re not putting that deposit in, so your payment’s going to be
much higher than if you’ve got a lower loan. Option #5, now we would have previously spoken
about self-managed super funds but again, this is one that’s really eased up over the last few years
and so, buying a home with your super is much harder these days, especially if you’re going to get a loan
but something that is much easier is the government’s First Home Super Saver Scheme
— the FHSSS. We’ve got another video on this but Nathan,
just touching the high notes, what is the First Home Super Saver Scheme do? Effectively, it allows you to build a deposit
whilst not having much of an impact on your cash flow that you’re receiving from your employer
because effectively, you’ll increase your super contributions each month or week
or fortnight or whenever you get paid and that gradually builds over time. Anything over 9.5% that you’re contributing
towards super will go towards the First Home Super Saver Scheme
and then can be accessible at a time when you’re ready. Yeah, so there’s a bunch of criteria
and like Nathan said, the ways of setting it up can be a little bit complicated. We’ve got an article on our website that you can check out
that tells you about the benefits of setting it up, the contribution caps because you can’t
just put in unlimited money. It’s actually limited to about $30,000 over five years
and there’s a couple different calculators you can play in there to see if it’s worthwhile
but like Nathan said, in a lot of scenarios, you can actually reduce your pay, by say $100 a week
but net — after tax and everything — it doesn’t really make that big impact. It’s crazy. So I think definitely check that out if you haven’t
gotten your deposit together. That’s a good way of buying a home with no deposit
and not affecting your day-to-day cash flow. So there are five no deposit home loan options, how to get a house without having a deposit at all,
which you’re going to use? I think it’s fair to say, with what the guarantor wants,
the most popular one these days but there are still a couple of ways
— Partly with the gift, though. I think the gift still quite popular.
So the first two is extremely popular. Ask mum and dad but anyway, which one do you like? Let us know in the comments below
and if you got any questions, hit us up at HunterGalloway.com.au.

3 comments on “No Deposit Home Loans [Do they exist?]”

  1. Mortgage Broker Brisbane - Hunter Galloway says:

    For free home buying resources, calculators and downloads check out the First Home Buyers Hub https://www.huntergalloway.com.au/hub

  2. Marcio Andre Soares da Silva says:

    Hi! I am getting ready for buying my first home in Brisbane. Your videos are very informative. Thanks for sharing knowledge!!!
    I got a question. I am making regular salary sacrifice deposits towards my superannuation.
    I am making deposits of $1,250/monthly, but 15% of it is taken as a contributory tax which makes this amount 1,062.50 net (in one year = $12,750).
    Is this $30,000 total in deposits or a total amount that I can withdraw?
    Instead of $1,250 extra deposits, should I deposit $1,470 (roughly), then I would have $30,000 net (after tax on superannuation/without counting interests). Right?
    May you clarify that?
    Cheers

  3. Richard Williams says:

    shit mic's lads

Leave a Reply

Your email address will not be published. Required fields are marked *