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No savings home loans

Marty McDonald - Friday, June 03, 2011

When buying a property most lenders require that you have "genuine" savings of at least 5% of property's value. There are however alternatives to the 5% genuine savings rule which I will outline below. There are no deposit options as well as no genuine savings options.

Did you know there are still 95% no genuine savings loans available?

While most lenders moved away from these loans over the last few years there are still a few lenders who offer these loans. This type of loan is best suited to high income earning, first home buyers who are purchasing in NSW or other states where there are stamp duty exemptions. The deposit needed can be from almost any source but must be disclosed. The deposit could for example be made up from a gift from family, a windfall gain, the sale of an asset, the FHOG or even a loan from family (or a combination of sources).

The one catch with these loans however is that the mortgage insurance premiums are larger than standard genuine savings type loans to reflect the perceived additional risk. Lenders that offer them also don't allow the LMI premium to be added to loan meaning while they will lend you 95% of the value of the property the mortgage insurance has to be factored into the additional costs that have to be covered by the borrower as well as the normal government and legal costs.

As the mortgage insurance premiums can be upwards of 3.5% of the loan amount the borrower therefore needs an 8.5% deposit plus funds for stamp duty (if applicable). This is the equivalent of a 91.5% LVR loan with a lender who allows the mortgage insurance to be added to the loan. So its not really a 95% loan...in many cases a borrower would be better off if they could scrape together the additional 1.5% deposit that way they could secure a 90% no genuine savings loan which has better interest rates, more mainstream lenders options and much lower LMI costs.

No deposit? You can borrow 100% of the value of  a property or even 110% in some cases with a guarantor.

If you have a direct family member who has significant equity in a property and they are willing to allow their property to be mortgaged as security for your loan there are a number of loan options available. As the borrower you must be able to service the loan in your own right but the security for your loan is both the property you are buying and the family members property.

Rent can be used as a way of proving genuine savings!

As an alternative to proving genuine saving (such as having funds in a bank account for an extended period of time) two mainstream lenders will consider the rent you pay in leui of having a savings history. You still have to have the funds for the minimum 5% deposit but they can come from family, tax returns, bonuses, inheritances, sale of assets, tax refunds etc.

If you have been renting for more than 12 months continuously, have never been late paying the rent and rent through a licensed agent then the minimum 5% deposit required can come from anywhere! including a gift from parents or an a tax refunds or commission cheque...whatever!

If you have been renting for more than 3 months but less than 12 months with the same conditions as above then there are slightly tighter rules. Please contact us to see if your situation would qualify for either a 95% or 90% loan without genuine savings.

Putting it all together - no deposit and 95% no genuine savings loans

If you don't have the traditional 5% genuine savings there may be alternatives to still get you into a property. Please contact me to find out if you qualify for a 95% loan with no savings or a no deposit loan.

Other pages on the Mortgage Experts website you may find useful:

- 95% home loans
- LMI

Thanks,

Marty McDonald

About the Author: Marty McDonald is principal of mortgage broker “Mortgage Experts”. Marty specialises in assisting active property investors with loan structuring advice and implementation as well as helping credit worthy borrowers with slightly outside the box income and employment situations. Find Marty on and LinkedIn.

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