No Deposit Home Loans [Do they exist?] - YouTube

No deposit home loans, do they exist?

Are they the unicorns of the finance world?

We'll find out today in our video to discuss no deposit home loans and what your options are.

Option #1 and I would say, probably the most popular way of buying a home with no deposit today

is through a guarantor home loan. So Nathan, how's that work?

So practically speaking, a guarantor home loan allows you to lend up to

105% of the property that you're purchasing.

It also means that you don't need a deposit and the way it works is we would actually put 80%

of the purchase price on the purchasing property in the owner's name.

So in other words, the property you're buying, the bank will put a good old-fashioned 80% loan against it.

Sweet. So then what happens to the other 20% or 25% leftover?

The remainder goes on the guarantor's property.

So mum and dad's property would have a second mortgage registered on their property there.

Okay. So basically what you're saying is that the deposit part of the loan goes against

the old folks home and the bulk of the loan, the 80% goes on my house

and that means I can buy without a deposit.

Yup and the best thing about it is the full loan, you're responsible for.

So your mum and dad don't have to make any repayments and within a two, three,

four-year period of time, the property you purchased should hopefully increase in value, the loan should,

of course decrease in value, and we can look to remove that off the old folk's home.

Yes, so really, a guarantor home loan is a great stepping stone into the property market.

It means that you can get in today.

They're particularly good if you've got a really strong income, really high income

but you might be living in somewhere like Sydney or, I guess anywhere in Australia where your rent

is pretty high and you find it pretty tough to save up.

A guarantor loan will help you get into that home.

It means you can borrow 105% of property price, so you can put no deposit down and cover a bit

of the stamp duty and other costs and then you can use your parents' house as either deposit,

be it in pay it down as quick as you can and get into the home.

And I think lastly, just remember, it is important for you old folks to get legal and financial advice

to make sure this is something that is suitable to them because as you can appreciate in a worst-case scenario,

the guarantor's property could be at risk in a foreclosure situation.

So do get that advice and make sure it is suitable.

Option #2, a gift.

Yeah, this is another extremely popular option, whereby if the old folks don't want to

put their property up, they can give you a cash gift: $20k, $30k, $40,000.

That thing can be used as a deposit to purchasing a home.

Yeah, so the cool thing with this is it can be from relatives, it can be, I guess from friends,

if you really want depending on the gift amount but if they give it to you, that's a sign of form

that says, it's non-refundable and then they're giving you the gift forever basically,

and that can go in the home as your deposit.

So that can make up your 5%, 10%, 15%, 20% deposit and your way to the races.

Option #3 and this is a bit of pretending it's not real is you would have, maybe seen this online

and we kind of want it debunk it a bit is using a personal loan instead of your deposit.

Now this is something that was hugely popular a few years ago, Nathan.

It's still on a bunch of websites today saying, "Hey, go out and get one of those loans

from Alec Oldburn for 30,000 and that's going to be a deposit."

Why can't I use it anymore? Yeah, the banks used to allow a personal loan

as funds to be used as a deposit. Nowadays, that is a no-no.

So unfortunately guys, you can't do that anymore.

If you do get a personal loan, the banks are likely to find out, you know, the purpose and where those funds

are coming from and as soon as they know you've borrowed money towards your deposit, it's game over.

I think the other thing too it's a bit tough for a personal loan because they really murder

your lending capacity, so the bank criteria is going to be a lot harder over the last few years and personal loans,

if you're making a payment of $500 to $1000 a month, it can actually reduce

your lending capacity by hundreds of thousands of dollars.

So that is the other reason why, I think that's sort of a bit loose doing these 15%, 20% personal loans

and then giving someone a house, it's too much, let's get rid of it and don't do it.

So on its own, it doesn't exist anymore. Sorry.

Number 4 and this one doesn't really apply if you're a first home buyer but it still applies

if you've got an existing home is using equity in an existing property.

So Nathan, tell me about this. So you don't need any deposit, right?

Yeah, this is the fastest way to borrow more money because effectively, savings takes time,

a property that you purchased three years ago as that has increased by $300,000, well guess what?

You can use that equity to leverage to purchase in the next property.

So it's really neat, it's a great way to be able to expand your portfolio faster

and without having to save the deposit.

Yeah, I think the only trap that this one is getting into too much debt.

So just make sure you do your cash flow, make sure you do your modeling to ensure that you can afford it

because then you are borrowing 100% potentially on the new property because you're not putting

that deposit in, so your payment's going to be much higher than if you've got a lower loan.

Option #5, now we would have previously spoken about self-managed super funds but again,

this is one that's really eased up over the last few years and so, buying a home with your super is much harder

these days, especially if you're going to get a loan but something that is much easier

is the government's First Home Super Saver Scheme -- the FHSSS.

We've got another video on this but Nathan, just touching the high notes,

what is the First Home Super Saver Scheme do?

Effectively, it allows you to build a deposit whilst not having much of an impact on your cash flow

that you're receiving from your employer because effectively, you'll increase

your super contributions each month or week or fortnight or whenever you get paid

and that gradually builds over time.

Anything over 9.5% that you're contributing towards super will go towards

the First Home Super Saver Scheme and then can be accessible at a time when you're ready.

Yeah, so there's a bunch of criteria and like Nathan said, the ways of setting it up

can be a little bit complicated.

We've got an article on our website that you can check out that tells you about the benefits of setting it up,

the contribution caps because you can't just put in unlimited money.

It's actually limited to about $30,000 over five years and there's a couple different calculators

you can play in there to see if it's worthwhile but like Nathan said, in a lot of scenarios,

you can actually reduce your pay, by say $100 a week but net -- after tax and everything --

it doesn't really make that big impact. It's crazy.

So I think definitely check that out if you haven't gotten your deposit together.

That's a good way of buying a home with no deposit and not affecting your day-to-day cash flow.

So there are five no deposit home loan options,

how to get a house without having a deposit at all, which you're going to use?

I think it's fair to say, with what the guarantor wants, the most popular one these days

but there are still a couple of ways -- Partly with the gift, though.

I think the gift still quite popular. So the first two is extremely popular.

Ask mum and dad but anyway, which one do you like?

Let us know in the comments below and if you got any questions,

hit us up at HunterGalloway.com.au.