During the global financial crisis, banks in Australia tightened up their lending policy with most requiring a 10% deposit minimum before they would lend. The deposit needed to come from a genuine source - that is, saved up or held in a bank account for 3 months minimum before the bank would lend.
Recently though, policy has started to relax and home loans with no genuine savings are available from a variety of lenders at normal interest rates to good quality applicants.
What are Genuine Savings?
Genuine savings is defined as funds or equity held or saved up over a 3 month period. Genuine savings would include;
1. Shares held in personal name for a minimum of 3 months,
2. Equity in real property (ie, another home you own),
3. Cash savings saved up in a bank account over a minimum 3 month period,
4. Cash deposited in an account and not touched for 3 months (ie, proceeds from the sale of a car or gift placed in a bank account for 3 months will be considered genuine savings)
Are there options if I do not have any genuine savings?
In recent times some lenders have started to relax their policy slightly and will now lend to good quality applicants with clean credit history and good employment history for properties in good areas, even if they do not have 5% genuine savings. Therefore, the 5% deposit can now come from;
Sale of an Asset,
First Home Owners Grant,
Borrowed (ie, from a personal loan)
Builders boost or other government grant,
HPAS (defence grant)
What other requirements do I need to satisfy to qualify for a non genuine savings home loan?
If you do not have genuine savings, then there are strict criteria that needs to be satisfied before the banks will lend. You will need:
1. Good employment history which is generally defined as 1 year in current job, or 2 years in the exact same line of work,
2. Clean credit history free from defaults (1 small default for a telephone or electricity account may be accepted),
3. If self employed, will require 2 full years financials and tax returns,
4. No probation periods.
How much can I borrow?
Up to 95% with Lenders Mortgage Insurance capitalised on top (ie, you don't have to pay for the Mortgage Insurance upfront). This means that a very basic property in Queensland for a first home buyer would only require approximately $7500 of their own funds for a $250,000 purchase.
What products, features and interest rates are available?
Fixed or variable rate home loans are available which can include full features like redraw and an offset account.
Can I use a Personal Loan as the Deposit?
Yes, providing the loan still services - that is, you can afford the repayments on both the home loan and the personal loan.