Most people think that if you don’t have savings, the opportunity to buy a house is not possible. Did you know you can borrow up to 95% of the purchase price of your new home? There is light at the end of the tunnel – as long a you know how to prepare for your purchase, you could be in your new home sooner than you think.
The question is, where does the deposit come from?
It can come from pretty much anywhere you like. Yes, you do need a deposit and the minimum of 5% needs to come from somewhere, however most banks will tell you, you need savings in your bank account for a minimum of 3-months – but this is not the case with certain lenders.
The funds can be from;
1. A non refundable gift from family or friend
2. Tax refund
3. Sale of asset (car, boat, caravan)
4. Personal loan (repayments need to be taken into consideration)
5. First Home Owners Grant or Construction Grant
6. Bonuses, inheritance, sale of shares, term deposits and a whole bunch more…
* You can also read more about what are considered genuine savings in another article we posted a couple of months ago.
Let’s look at some examples
EXAMPLE ONE
Chris and Julie want to buy their first home for around $350,000 but have no savings. Chris has a motor bike he is going to sell for around $5,000 and Julie’s parents have offered them a gift of around $15,000. With a letter to state the gifted funds don’t have to be paid back they are on their way to purchasing their first home.
They live in QLD so they will receive a stamp duty concession (states differ in concessions and grants check this link for offers in your state) – use our free Stamp Duty Calculator to work out stamp duty in your State.
EXAMPLE TWO
Mary and Bill want to buy their first home and have saved $18,000, but don’t have enough to pay for stamp duty and other costs for their dream home of $350,000.
As they have saved the 5% deposit from their income over a 3-month period, they are eligible to have up to $20,000 of additional funds added onto the loan to cover stamp duty, legal fees and other purchase costs. There will even be some funds left over from their funds to help with moving costs and some new furniture.
EXAMPLE 3
Ben has a good income and has been at his job for over 2 years,
Ben takes a personal loan to cover the stamp duty and costs. He has a good credit rating and has been renting a property and maintaining the rent and his car loan well. He has sold a car and has $20,000, but does not have the stamp duty or costs and not eligible for any grants. He is sick of renting and has found the perfect property at $400,000.
His income is sufficient to cover his existing repayments on his car loan and the new personal and home loan repayments.
As you can see there are various ways that you can qualify to get into your new home with only 5% deposit. You may even be able to get a home loan when you think you don’t have the capital or savings required.
If you are unsure or need some assistance, we will be happy to help you go through some figures and sort out a home loan for you.