Bad Credit & No Deposit Home Loans Rates
No Deposit & Bad Credit Home Loans
What are no deposit home loans?
In a nutshell, a no (or zero) deposit home loan is a type of loan that can be applied for in which a borrower will utilise their own credit history to reassure a bank among other things, and then receive 100% of the cost of their new home from their chosen lender. As a result of the GFC (Global Financial Crisis), even the big four banks in Australia are no longer offering these types of loans even if you are purchasing a property with a buyers agent.
What are the alternatives to no deposit loans?
Instead of these types of loans, certain banks are now providing 100% home loans. Although these may seem similar in nature to zero deposit mortgages, there are several factors that make them different – and due to the extensive nature of checks, many potential borrowers opt to hire a mortgage broker for help with the application process. The first question you need to ask a broker is "estimate the value of my home" and then use this as the baseline metric to calculate how much you will need to borrow.
How a 100% home loan works
In the simplest terms, this is a type of loan whereby the borrower can request 100% of the cost of the loan without needing to pay any amount as a deposit. In order to be eligible certain requirements are expected to be met; and they include a demonstrable track record of meeting repayments, a steady income and other similar attributes.
There are even options where a borrower can apply to receive 105% of the total cost of their home – if they have a guarantor to back their borrowing plans. Access to a guarantor can be very beneficial and by applying with someone acting to guarantee the loan there are no need for savings; although it’s worth noting that the guarantor will need to secure the loan by placing their own property as collateral.
In some instances a zero deposit home loan can be obtained by applying for two individual types of loans. The first will be a personal loan, whereby up to 5% of the cost of the property can be borrowed with its own repayment agreement. The second can be a home loan or mortgage and it should provide the rest of the property cost (95%).
By applying for these loans individually with the same bank, once approved it can be fairly straight forward to consolidate the loans into one singular option and then repay the total in monthly increments. The catch is that anyone applying to borrow 100% of the total cost of their new home will need a proven track record of earnings, notable savings in a trusted account (preferably with the bank being applied to) and a flawless credit history – or as close to flawless as possible.
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