Purchasing

There are a few areas to consider in relation to this category:

• Lenders regard this category of home loan to be higher risk, given that a larger proportion of the property value would be purchased through debt. As such, loan applications are reviewed in more detail. Paperwork and supporting documents bank statements and existing loan statements are scrutinised more rigorously to ensure that you are able to meet the monthly repayments as well as your ongoing living expenses. It is important that all required documents are provided to the bank in order to streamline the process and minimise follow-up questions by the lender, which can cause delays. We have demonstrated experience to guide you through the process.
• Lenders Mortgage Insurance (LMI) costs need to be budgeted for. LMI protects lenders from the event that a borrower defaults on their home loan and makes up approximately 2% of the property value. Generally speaking, LMI is required by law to be obtained where deposits make up less than 20% of the property value. For more information, refer here.
• Interest rates may be higher to compensate for the lender’s perceived higher risk. Given your personal circumstances, preferences and budget, you should consider what interest rate range you are comfortable with in order to meet the repayments.
• Genuine savings: If your deposit has been sourced outside of “genuine savings”(Page 26, FAQ Genuine savings) you may need to revisit your strategy if the lender you want to apply to has genuine savings criteria. The definition of genuine savings varies from lender to lender, but typically refers to money saved over a period of 3 to 6 months. Ultimately, the lender wants to know that you have the ability to meet your monthly repayments, and the best way for them to see this is by looking at your savings history. Genuine savings can include gifts of cash or inheritance that have been held for at least 3 months. For more information, refer here.

No deposit home loans or guarantor loans, permit your parents or other close family member to act as guarantor using their Australian property as security. No deposit home loans function similarly to standard home loans. This means that a range of loans and facilities would be available to you (e.g. fixed or variable interest rates, offset accounts).

If you can’t locate a guarantor, other alternatives include:

• Home loans for professionals, which offer no deposit home loans to university-educated professionals who have worked in their industry for 3 or more years, and are purchasing an owner-occupied property.
• Gifts can be used to fund your deposit as deemed genuine savings (if held for 3 months).
• Personal loans can be used to cover your home loan deposit, provided you earn enough to afford both loan repayments and have a clear credit history.
• Equity: If you already own a property, you may be able to use this to fund the deposit for your next property. A property’s equity comprises the property value (as per an independent valuation report) less the amount owing on the home loan. The cost of these valuation reports are often covered by the lender.

There are a number of steps that you can take to improve your position from a lender’s perspective:

• Ensure you have gathered all the necessary documents
• Show that you have a history of genuine savings and that you have demonstrated the ability to save money over a period of time
• Minimise spending 3 to 6 months or more before your application