Where to obtain deposit payment for your future Property?
- First home saver account (FHSA). For more information, go to https://www.ato.gov.au/Individuals/Super/In-detail/Important-changes-to-the-First-home-super-saver-scheme/
- No Genuine Savings. Some lenders have a no genuine savings policy which allows a borrower to borrow up to 90% of the purchase price or valuation value. This helps to lower the deposit amount required for settlement. Your 10% deposit and purchase cost do not have to come from genuine savings. It can be from the sale of assets or investments. It can also be a gift from a family member as long as they provide a statutory declaration stating that the gift is non-refundable. However if you borrow more than 80 per cent of what the lender considers to be the value of the property (known as the loan-to-valuation ratio or LVR) they will ask you to pay mortgage insurance on their behalf. What this means is that you as the borrower will have to pay for mortgage insurance that the bank takes out to minimise their risk in lending you the amount above their normal lending guidelines.It is important that you understand that Lenders Mortgage Insurance protects the lender, not the borrower in the event that you default on your loan and the outstanding value of your loan is greater than what the lender would receive from selling your property. Where a claim for loss is paid to the lender, the Lender Mortgage Insurer may seek recovery from the borrower, or any guarantor, for the balance of the loss outstanding.
- Genuine Savings. This is a genuine savings lending policy that is available with some lenders. You may borrow up to 95% of the purchase price. The lender will require proof of genuine savings for the 5% deposit. You will have to show that you have saved the 5% over a period of 3 months. It cannot be a gift or a sale of assets. The 5% can be held in a savings account, deposit account or share investments. As the loan amount will be greater than the standard 80% lending guidelines, you will have to pay a Lenders Mortgage Insurance (LMI) premium. For a full explanation of what LMI is, see the Non Genuine Savings section above. Premium rates will be higher still for a 95% loan. Again the rates differ for each lender.
- Guarantee If you do not wish to pay Lenders Mortgage Insurance premium, you may still be able to obtain finance if your parents or an immediate family member is willing to use the equity in their own home to guarantee a part or the entire home loan. If the guarantee is only for part of your home loan, they have the peace of mind of knowing that the guarantee is limited to a specific amount. Only some lenders will accept a guarantee. Utilising this option is a tedious process but with the right guidance, you will be able to achieve it.