With its bustling laneways, vibrant arts culture, culinary delights and promise of adventure, Melbourne has become the dream city for many to call home. But the thought of saving up for that initial deposit can be daunting. We get it. Every penny saved feels like a day spent waiting. What if we told you that you might not have to wait? Let’s unpack the possibility of buying a house in Melbourne with no deposit.
Is Zero Deposit Really an Option?
Traditional wisdom tells us: No savings? No home. But what if tradition doesn’t have the entire story? Enter the world of low or no-deposit Melbourne home loans that are changing the narrative in Victoria, particularly in the heart of Melbourne. Leveraging property equity and utilising financial avenues such as guarantor home loans, FHOG & the Family Home Guarantee are reshaping how we view the initial steps into property ownership. But how does it work? Exactly how to get a mortgage without a deposit?
The Nitty-Gritty: How Does It Work?
As mentioned, you have multiple options if you’re interested in getting a no-deposit home loan. Here are some of them:
Guarantor Home Loan
What is it?
A guarantor home loan works when you have a close family member or a trusted friend acting as your financial co-pilot. They pledge their own property as security, giving you a boosted edge in the borrowing game.
- Bypassing the LMI: With a guarantor, there’s a good chance you could completely sidestep the Lenders Mortgage Insurance (LMI), a cost that typically burdens those without a 20% deposit.
- Greater Borrowing Capacity: In some cases, you could borrow up to 100% (or more) of the property value, making buying a house with no deposit attainable.
- Not everyone has a potential guarantor: It requires someone with substantial property equity willing to back your loan.
- Your default could impact your guarantor’s credit: Remember, they are essentially co-signing your home loan in Melbourne.
Equity Home Loan
What is it?
This is for those who, or whose family members, already have a foot in the property door. The increase in value of an existing property over time (equity) can be harnessed to finance another.
- Leveraging Assets: Instead of dipping into your cash savings, you’re using your property’s (or your parents’ property’s) grown value.
- Potential for Larger Loans: Depending on the equity amount, this could significantly amplify your borrowing power. Talk to a trusted mortgage broker in Melbourne to maximise this potential.
- Market Volatility: If property values drop, you might find yourself in negative equity territory.
- Higher Repayments: The larger the loan, the heftier the repayments can be. That’s unless you leverage your equity to get a no-monthly-payment home loan.
FHOG (First Home Owners Grant)
What is it?
The FHOG is a government initiative aimed at bolstering the spirits (and finances) of first-time home buyers. Buying your first home in Melbourne? You can enjoy a $10,000 FHOG in Victoria. You can use this grant for the deposit or let it cover 5-10% of the property sale price.
- Financial Boost: Depending on eligibility, this can offset several costs associated with property buying or securing your mortgage in Melbourne.
- State-specific Advantages: The grant amount and criteria can vary, so it’s crucial to understand and maximise the offerings specific to Victoria.
- Eligibility Criteria: Not everyone qualifies. Factors like property value or the type of property can influence eligibility.
- You can’t entirely rely on FHOG: If the property or lender requires at least a 20% minimum deposit, you need other sources to make the house deposit up to the mark and not pay LMI. As such, FHOG may only be beneficial in low-deposit home loans in Melbourne.
Family Home Guarantee
What is it?
The Family Home Guarantee is tailored to assist single parents with no property under their names. This program facilitates home purchases with extremely minimal deposits.
- Super Low Deposit: Eligible individuals might only need a 2% deposit. The state government will cover the remaining 18%.
- Increased Property Access: This program opens doors to properties that might have been previously out of reach.
- Limited Spots: Only a certain number of guarantees are available each year.
- Eligibility Constraints: Income limits and property value thresholds apply. As of this writing, you need a maximum taxable income of $125000 to apply for the Family Home Guarantee in Melbourne or anywhere in Victoria.
The Flip Side: Potential Hitches
We’ve already answered the question on how to get a no-deposit home loan. However, it’s also essential to be aware of potential bumps before applying for it. Here are some of them:
- Mental Weight: The thought of larger repayments can be heavy. That’s not to mention Melbourne’s occasionally steep home insurance rates.
- Lenders Mortgage Insurance (LMI): If your deposit is less than 20%, you may face this extra cost, which protects the lender, not the borrower.
- Higher Interest Rates: No surprise here; some lenders might charge higher interest rates for no-deposit or low-deposit loans.
- Home Loan Approval Hurdles: With greater risks for lenders, they might want a deeper dive into your finances. This could mean a lengthier loan approval process with more paperwork.
Your Next Step?
At this point, it’s no longer a question of “Can you get a mortgage without a deposit?” Perhaps, you now feel excited about the prospect of buying a house in Melbourne with no deposit. Or maybe, you feel a tad overwhelmed by your options. Either way, remember this: Knowledge is power. And guidance? That’s invaluable.
The Melbourne Mortgage Company stands at the intersection of both. As we merge professional expertise with a genuine drive to help, we’re ready to help. Whether it’s deciphering how to get a Melbourne home loan without a deposit or seeking the best home loan rates Melbourne can offer, consider us your go-to home loan brokers.
Simply put, our team of seasoned mortgage brokers in Melbourne is ready to turn your dream into a tangible, no-deposit reality. Contact us today to get started.