Can I get a Home Loan with no Genuine Savings?
How to Get a Home Loan with No Genuine Savings
Are you looking for a way to get started on the path to home ownership, but you have no genuine savings? With rising cost-of-living expenses, it can be difficult for many individuals and households to save up for the minimum 5% deposit required by many lenders. The good news is that some lenders are beginning to relax the genuine savings rule for mortgages, which means you might be able to obtain a home loan, even if you have no genuine savings.
How it works
The genuine savings rule traditionally required you to have the minimum 5% deposit lodged in a separate account for three months. But whether you are an individual, a couple, or a family, you might now be able to get your deposit from sources other than genuine savings. These are some of the potential sources that lenders might accept, if you are applying for a home loan with no genuine savings:
- Gifts and inheritance. Some lenders will accept funds sourced from gifts from friends and family. Some might also accept funds sourced from an inheritance.
- Sale of asset. You might be able to fund part of your deposit from the sale of an asset such as a boat, a motorcycle, or a car.
- Tax refunds. Some lenders are happy to accept your tax refund as part of your deposit.
- Shares. The sale of shares that have been held for a minimum period of time can be used to fund your deposit.
- Equity. If you have existing equity in a home or other property, you can fund your deposit partly from this.
- Term deposits. In some cases, lenders might be happy to accept funds held in term deposits as part of the deposit for a home loan with no genuine savings.
There are other potential sources that a lender might accept for your deposit. These include windfall gains, employer payouts (such as long-service leave payouts), and even government grants.
Am I eligible for a home loan with no genuine savings?
While a lender might offer you a home loan with no genuine savings, you will still need to meet minimum requirements. You will need to have sufficient funds (as sourced from the approved means outlined above) for a 5% deposit. You will usually also need to have a good employment record. If you are self-employed, you will probably need to demonstrate your financial status over the past several years.
Most lenders will require that you have a clean credit history. Other requirements, such as buying in your own name rather than through a business structure, might also apply.
Can I personalise my loan?
You can personalise your loan, as applying for a home loan with no genuine savings is similar to applying for any other home loan. You can ask for a variable or a fixed rate. You can also specify additions such as a mortgage-offset account, or a redraw facility.
Allowed borrowing amounts
For a home loan with no genuine savings, you can borrow up to 95% of the value of the property, and you can opt to have mortgage insurance capitalised, which means you can borrow as much as 97% of the total cost of your purchase.
Required deposit amount
Buying a home with no genuine savings can be cheaper than you might believe. For example, with grants such as the First Home Owners Grant, you can buy a $250,000 property with as little as $7,500 out of your own pocket, or $12,600 for a $350,000 property.
How to apply
If you want to apply for a home loan with no genuine savings and you have 5% deposit, and a good employment and credit history, give ABC Mortgages a call today to get started. We offer a free initial phone consultation that can help you work out whether you are eligible for a suitable home loan.