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Low Deposit Loans

Thinking About Getting a Low Deposit Home Loan?

The price of properties has certainly increased over last few generations. Previously loans were based on one income earner but as the labour force has expanded and banking policies have changed, the lending for housing has also changed. Due to the increase of the populations in most city states, the cost of properties has increased significantly, meaning that most first time purchaser’s require a a significant sum of money for a 20% deposit. In fact for many couples or individuals 20% is unattainable initially.

What is Considered a Low Deposit Loan?

Generally low deposit finance is anything less than 20% of the purchase price.   Luckily some banks and lending companies will often allow you to borrow 95% of the property value, meaning that you only need 5% deposit.

Why is a Low Deposit a Problem for Lenders?

Because property doesn’t always go up and can sometimes go down, the lenders use the deposit as a buffer against property price fluctuations, should they need to foreclose on the loan due to non payment. 

What if I Only Have 5% Deposit, Are There Options?

Having Low deposits increases the risk to the Loan Company and as a general rule they will need to have a mortgage insurance over the loan. In the finance world, this is called a loan mortgage insurance (LMI) and is generally mandatory for a company to approve a loan with a low deposit. The cost of this is insurance is generally added to the loan amount. Some lenders have their own loan mortgage insurance companies or arrangements, it depends on the circumstances and loan company most suited to the borrowers specific circumstances.

What If I Have No Deposit?

There are some other alternatives if you have no deposit. The most common is when a couple’s or individual’s  parent/s guarantee the deposit part of the loan or the difference between the deposit that has been saved and the amount needed to avoid mortgage insurance. This does require an assessment of not only the people requesting a loan but also of the parent or other guarantor to finalise the loan. 

Can I Use Other Collateral Such as Shares or another Property If I Have a Low Deposit?

Like all loans, your individual circumstances often determine the best course of action and the possibilities available to you. You might be able to cross collateralise an existing loan together with your current deposit to meet the criteria. You may be able to sell shares or borrow against those shares to gain a deposit. There are many options depending on the individual circumstances of the borrower and the available lender.

What Is The First Step in Getting a Low Deposit Loan?

Generally, we recommend you get a free credit report by clicking on the free credit file report by filling in your details. 




Can you help me if I have only a 5% deposit?

We can certainly assist you to determine your eligibility for a loan. We suggest you get a free credit report initially.
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Can my parents help me with a loan guarantee?

Yes, Under some circumstances your parent or guardian, can guarantor the loan deposit or the difference between your deposit and the 20% needed to avoid Loan Mortgage Insurance.