Buying a home with 5 percent deposit

It is true that no deposit home loans are a dream of the past, but several lenders continue to accept home loan applications for financing 90 to 95 percent of a property’s value. A mortgage broker could guide you to the right lender for your situation.

You need to pay lenders mortgage insurance (LMI) if you borrow more than 80 percent of a property’s value. Depending on the size of the loan, LMI can run into thousands of dollars, adding to the cost of your loan. Luckily, a few lenders allow you to roll in your LMI premium into the loan amount, so that you can pay it off over a long term without feeling the pinch.

What to know before applying for a low deposit home loan?

If you think you can service a home loan but don’t have enough deposit saved up for the purchase, you could always opt for a low deposit home loan on payment of LMI. A high LVR loan means banks will scrutinise your application more carefully. The following tips could increase your chances of approval:

• Clean credit history – A clean credit history is the strongest ammunition in your armoury when you go mortgage hunting. By maintaining a clean credit file, you not only increase your chances of approval but also can negotiate a better rate on your home loan.
• Proof of genuine savings – Stowing away money regularly in your savings account is a sign of financial discipline, and with three to six months of genuine savings in your account, you can have a lender consider your application favourably.
• Low debt-to-income ratio - Having a debt-to-income ratio of over 40% means you are spending too much money to meet your debts. For a lender, this means you have low disposable income to meet your regular expenditure and at higher risk for potential default on your mortgage, if approved.
• Stable employment – It is not the right time to switch employers when you are applying for a home loan as stable employment history can sway the decision in your favour. Being in the same job for at least a year is looked upon favourably by lenders.  

Mortgage brokers work closely with several lenders and are aware of the precise requirements of the lenders they deal with. If you are looking for a low deposit loan, a mortgage broker can guide you to the right lenders, apart from doing all the legwork for you. If you plan to buy a home or refinance an existing home loan, get in touch with a HashChing mortgage broker here.

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About HashChing

HashChing is a borrower-friendly online mortgage marketplace, a first of its kind in Australia. Powered by sophisticated algorithms, it is a tech platform that enables borrowers to access and compare broker pre-negotiated mortgage rates from over 60 lenders across Australia. Besides, HashChing offers on-demand broker services wherein you can choose from verified mortgage brokers in your area, connect with them and discuss your requirement from the comfort of your favourite screen. Recognised for changing the landscape of the mortgage industry across Australia, HashChing continues to innovate, helping Australians realise their foremost dream of buying a home.