The total amount of your deposit will affect the types of loans and lenders that are available to you but with a little help from a LadyBird Loan Consultant securing a home or investment loan at a competitive interest rate may be easier than you think.

True 100% loans that cover the entire purchase cost of the property are unavailable in the current economic climate.

Some lenders will allow you to borrow up between 90% and 95% of the property value at their regular interest rate terms, provided you have the required genuine savings and can prove you can service the loan. Some may also allow you to capitalise your Lenders Mortgage Insurance costs. With the most common low deposit home loan, this effectively takes your borrowings to around 92% of the property value. These loans are suitable for any type of borrowing but particularly effective for first home buyers or Investors looking to maximise cash flow and gearing benefits.

Many lenders have introduced the requirement for borrowers to put at least 3% of genuine savings towards their deposit. For first home buyers, the genuine savings required is in addition to the First Home Owners Grant. The need to show genuine savings makes it more important than ever to work out a budget prior to beginning the search for a property, and sticking to it. 

Along with your deposit, you will also have to pay the standard fees and charges associated with your home purchase. If you don’t have all of the additional funds for fees and taxes, there are ways to cover some or all of the fees and your LadyBird Loan Consultant will be able to show you your options.

If you are a first homebuyer and are eligible for the grant you may be able to use some or all of your First Home Owners Grant as part of your deposit. Your LadyBird Loan Consultant can provide further information on the grant, and assist you with the application.

Limited guarantor loans, also known as ‘family pledge’ loans or equity guarantee loans, allow an immediate family member to ‘pledge’ assistance to the borrower, either as a guarantor providing support through repayment assistance or as a guarantor providing additional security. Family pledge is typically a feature as distinct from a loan, and can be applied to most loan types once approved.

They help the borrower to purchase when they otherwise may not have been able to, as well as reduce or remove the requirement to pay Lenders’ Mortgage Insurance. This is particularly useful if you are either a first home buyer or someone who is trying to re-establish yourself after a life event, such as a divorce.
A good limited guarantor loan will allow the guarantor to set the amount they are guaranteeing, in effect limiting their exposure to loss. It’s important to note however that it can be difficult for the guarantor to remove themselves from the loan as the main borrower becomes able to service the loan themselves. You should seek legal advice prior to entering into a guarantor arrangement.

There is also the option of using a monetary gift to assist you with your deposit. This can help you bring the loan you require down to a manageable level, and reduce or remove the requirement for Lenders’ Mortgage Insurance.

LMI is usually required when the Loan to Value Ratio (the value of the loan amount opposed to the value of the property) is greater than 80%. LMI protects the lender from any losses that may occur as a result of a default by the borrower (i.e. the borrower forgoes repayments). LMI does not offer any protection to the borrower.

Dependent on the lender and the risk, LMI can cost up to 3% (and more for larger amounts) of the amount you are borrowing. Up to 95% loans (or 5% deposit), the amount would typically be at the highest. As you get closer to 80% home loans (or 20% deposit), the cost usually discounts substantially.

When you get your home loan, if you want to completely avoid paying Lender’s Mortgage Insurance (LMI), you will need to have a 20% deposit. So while you can get a home loan with limited deposit. It is important that you know how to structure your home loan deposit, fees and charges to your best advantage.