Home ownership in Australia has never been so easy. The new home ownership program allows qualified buyers to purchase a home with no deposit. Instead of paying for your landlord's mortgage you can build your own equity. According to St George Bank and Wizard Home Loans, leading players in the "no-deposit home loan" market, the demand for this loan has been increasing during the past year. The bank lends you 100% of the value of your home. For instance, if you buy a $300,000 home, the lender gives you a loan of $300,000. Many lenders now offer "no deposit home loans" so choosing the right one is very important as there are differences in interest rate and conditions.
In reality, the name "No deposit" that the various lenders are using in their advertising is somewhat misleading because only properties up to a certain price will truly be "No deposit". Using a 100% Home Loan is based on the cost of the property, irrespective of the fact that you are a first home buyer, and the state in which you are purchasing the home. If you are buying in a state other than NSW, the amount of deposit you may require depends on the stamp duty exemptions applicable there. No deposit loans are also popular with first time home buyers since they can borrow 100% of the purchase price of the home immediately without having to having to build a savings for the deposit.
But another opinion is that the 100 percent loans carry a higher interest rate and is suitable only when the market is going up. There in a downside market it is better to put down a deposit of 5% and negotiate a lesser interest rate. There is additional cost involved in taking no deposit loans that is the mortgage insurance. This costs around 2 to 3 percent of the value of the loan. Establishment fee is another burden on the borrower.
In a typical home loan when a person wishes to buy a home for $100000 by using the conventional home loan, the bank generally provides him $85000 and the remaining $15000 is provided by the borrower, which is known as margin money. But in the no deposit home loan scheme there is no need for the deposit amount as the lender provides 100% of the home value, which is $100000.
The no deposit loan is the best option for those people who have fewer saving to pay the deposit amount which is usually around 15 % of the total value of the property. They come with flexible options too. This is the reason why the no deposit home loans are very popular in Australia. A person can apply for a no deposit home loan for buying new as well as old homes. The repayments can be made weekly, fortnightly or monthly. Self employed persons are also eligible to get the loan. borrower can use gifts and grants for supplementing the costs. The minimum loan amount that can be secured as no deposit home loan is $50000 and the maximum amount differ in different places. For example, the maximum loan allowed is $600000 in Brisbane, Melbourne and Sydney whereas for buying home in other areas, the maximum amount is $500000. The maximum repayment period allowed is 30 years.