You may find it difficult to get your property portfolio off the ground if you have trouble saving and you are in need of a no deposit home loan. But don’t despair; if you’re not able to generate your deposit through cash savings there are still ways to speed up the process of getting into your next property.
A lack of cash doesn’t have to keep you out of the property market. There are various options that can enable you to bypass the need to save up tens of thousands of dollars, giving experienced investors and first-time buyers the opportunity to act now by securing a no deposit home loan.
Get a guarantor
A guarantor loan enables an existing Australian homeowner, such as your parents, to provide a limited guarantee for your mortgage. The guarantor uses equity in their own property as security for the borrower who has no deposit. The primary security for the loan is still the borrower’s new property. Lenders offering these loans also put a mortgage over the guarantor’s property, which supports the guarantee.
These loans are generally used by people who can afford the loan repayments but have an insufficient deposit. It’s important for guarantors to be aware of significant responsibility and obligations they take on, for the borrower to service their loan. If repayments fall behind, the guarantor’s property could be at risk, so it’s essential all parties are aware of and comfortable with the loan requirements before entering into this kind of arrangement.
Use existing equity for a no deposit home loan
If you’re a homeowner or investor, you could have a deposit under your nose. You could already be sitting on a substantial amount of equity that could negate the need to save a deposit for your next purchase.
This is particularly powerful in markets where property prices have grown in recent years. Buyers should remember that you won’t usually be able to borrow the full amount of equity that has been created. Boosting the value of your property can be as simple as making some key aesthetic improvements or renovations, and having a number of lenders appraise the property’s value — some may value it more highly than others.
Some people who consider themselves cash poor may have thousands of dollars stashed away in superannuation – and under the right circumstances this can be unlocked for property investment.
Depending on your situation you might be in a position to establish a self-managed super fund (SMSF), which could open up the opportunity to invest into property without having to save for a deposit. If you are considering an SMSF property investment, it is important to seek independent legal and financial advice based on your circumstances.
If you set up an SMSF then you can generally borrow up to 80 per cent of the property value and your super fund covers the rest, essentially a no deposit home loan.