Compare, Select & Save on health cover with iSelect
7 Things You Need To Know About No Deposit Home Loans
By Sandy Naidu | September 2, 2008
The recent increases in property prices has forced many people to consider no-deposit home loans. In the past 6 years or so, the property prices have risen at a faster rate than incomes. Savings are not able to keep up with the property prices.
If you are struggling to save for a deposit for your house and are looking at other options, then here are things you need to know about no-deposit home loans.
1. The loan that offers you 100% of purchase price of your property is called a ‘no-deposit’ home loan. The normal recommended deposit is 20% of your property purchase price. But with these no deposit loans, you need zero per cent deposit. You don’t need to save for a deposit.
2. You still need to save for legal fees, stamp duty, property inspection charges plus other miscellaneous expenses.
3. The interest rate can be slightly higher for these loan types than the traditional loan types. There can also some be additional fees - double check with your lender. Make sure your loan at least has a redraw and additional repayment facility.
 |
4. Only go with a lender who is a member of MFAA. |
5. With no-deposit home loans you have to pay the lender mortgage insurance. This is a one off payment (only paid when you take out the loan). This insurance covers the lender. The amount you have to pay depends on the loan amount and the property purchase price.
6. Remember that with these loans you actually have no equity in your house at the time of buying. The lender owns 100% of your property. For a $300,000 loan at 9.5% and a 30 year time frame, it will take you at least couple of years to get 1% equity in your house. Some lenders also offer 105% home loan - this loan will also cover your fees. So for a $300,000 loan, it will take you 5 years (or slightly more) to own 1% equity in your house. In the mean time, if you are for some reason are forced to sell out, then you will end up owing to the lender if the property prices stabilize or fall.
7. Don’t borrow more than you can afford to repay. The one good thing to come out of the sub-prime crisis is that borrowers have become cautious and most will now not lend you more than you can service. Make sure that your monthly repayments are never more than 30% of your income (income after taxes). If you have more than average household expenses every month then your monthly repayments has to be less than 30% of your nett income. Make a detailed list of all your expenses - think, analyse and then borrow.
I personally don’t recommend these loans. The 105% home loans make me pull my hair out. My reaction towards the no-deposit home loans is no better either.
Share your thoughts…If you have taken this type of loan, do you have any tips or suggestions?
Stumble Upon
Del.icio.us
Buzz
- Interest Only Home Loans
Lately, the number of people taking out interest only home loans has been on the rise. With the normal loans you are paying off... - The Low Down On The Low Doc Home Loans
The traditional home loans can be an absolute nightmare for the self-employed. The lenders expect the self-employed to submit more paperwork than the others... - How To Save Deposit For Your First Home
Buying your first home is becoming more and more difficult. The Housing Industry Association's affordability index, fell by 6 per cent in June quarter... - How Do Reverse Mortgages Work?
Reverse Mortgages work in an opposite manner to the traditional home loans - hence the name 'reverse mortgages'. With a traditional home loan you...
Topics: Property |
October 25th, 2008 at 8:58 am
HI IM TRYING TOO BUY A PROPERTY HERE IN THAILAND BUT I CANT AFFORD A DEPOSIT,THANKYOU