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  1. #1
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    Default No deposit home loans.

    What's the go with them?
    Are they a good or bad bad idea?
    In a nut shell hubby and I are sick to death of renting, we pay $800 a f/n an we are now paying full water bills..
    Our plan was to save for a deposit which would take us 2+ years.
    We have done some looking online at houses we would be looking to buy, it's just me, Dh and dd, unfourtunitly no more children for us.
    So it will be a small house, the houses we like are going for around the $250,000 to $300,000 mark and to be in the area we know and love which we have been living in for nearly 6 years now.
    With the rent we pay, and the online calculators we have looked at we can afford a house loan.. It's just the deposit and its a horrible feeling paying for a house that isn't ours, dead money so to speak.
    I have only just found out you can get a no deposit home loans after our bank sent out letters regarding the first home owners grant.

    Would you or have you done this to buy a house?
    Good idea, bad idea?

  2. #2
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    Subbing because I'd also like to know!

  3. #3
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    Subscribing out of interest.

    When no deposit loans were offered a few years ago, people would always say they are a really bad idea. I can't help but wonder where we would be if we actually took the plunge and entered the property market back then, it probably would have worked out fine and we wouldn't be still stuck in the rental market!

    We too can afford a mortgage but are a fair way off the necessary deposit. Where we want to buy we'll probably be looking at 350K for our first home.

    Come November we are going to start saving our backsides off and hopefully enter the market late next year

  4. #4
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    Having a deposit is a safer and better financial decision but no deposit home loans can get you your home faster!

    The main disadvantages that I have seen have been that the interest rate and fees are higher plus you will have to pay mortgage insurance which would be thousands , the biggest risk is though as you are borrowing 100% if something happened ( one of you lost a job etc) and you had to sell the home, if the market is bad or even worse than when you bought the home your loan will be more than the house is worth ( we sold one like this a few years go - they bought it for $720,000 and sold it for $620,000 when the market turned so with expenses they still owed the bank about $150,000 plus thy had been paying interest for 2 years ) a lot of people did get burnt with no deposit loans and the banks did stop offering them for a while

    On the plus side if you buy really well, your jobs are safe and the market always does go up over time, your house price will go up and you will have equity in your home and all will be fine!

    Hope that helps!

  5. #5
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    We are in the midst of selling our investment property doing a wrap loan. Very basically, instead of paying upfront the total amount of the property, the buyer enters into a contract to slowly pay us back (ie say $250 a week) and they are then responsible for all money/maintenance issues with the property etc. They may take up to x amount of years to pay it off and can also pay any remaining out right at any time. The title of the property stays in our possession until all money has been paid off. If at any time the buyer forfeits, then we still own the property and any money that was paid to us.

    It is a good way to let renters into the market. Since the market is something like 98% rentals, it's a great way to be able to afford & pay off your own place. A few of my husbands friends have also sold properties in this way.

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    Personally, not a good idea. Especially if you choose an area in which soon after you buy house prices go down, you lose a job etc... Then you have to sell your house for less than you bought if for, you have no equity and end up owing the bank and back renting.

    You would also need to cover stamp duty and lenders mortgage insurance too.

    On the other hand if you choose a good area then you are likely to do ok so long as you have an ongoing income.

  7. #7
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    I haven't seen anywhere that does no deposit loans. And the ones I did see had a clause saying you need like a garauntor who has over a certain percentage invested in the property. You also get slugged with a mortgage lenders fee which for 100% loan depending on purchase price can be quite costly. We looked into it and we had a 5% depsoit for a 400k house was about $18k extra on top. Something to think about. Maybe ask the bank or where you would be going through for the loan.

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    I think whether it is a good idea or not depends on your circumstance, but for us it has worked out fantastically.

    We got a loan for $15k more than the purchase price of our home, to allow us to consolidate our other debts (credit cards, car). MIL basically put her house up as our "deposit", kind of like a guarantor. This meant that we avoided having to pay loan insurance (would have been about 10k for us), and also got us a better interest rate, because it was worked out based on the fact that we had a 20% "deposit".

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    It worked well for us. We had virtually no savings, but good very secure jobs and my Dad went guarantor and we bought our first house. We did madly save and we had over $10,000 in savings when we actually moved in to help us buy furniture/set up house (we'd just got married and I'd come from home and dh from a furnished apartment). To our shock/dismay that money disappeared within a month or two. And we ended up without a couch. The thing about home ownership is if something needs fixing it's your responsibility. We had the hot water system die 2 weeks in, so $1000 there & then. The roof started leaking on the same day (we knew it needed replacing, but didn't realise how urgently) and that was a $3500 fix (initial quotes came in at $9000 and you can imagine my distress at that!! - the pre-purchase inspection had said to expect to pay around $3000).

    So, it's a risky thing to go into a house without any savings. You run the risk of not being able to pay for urgent repairs, let alone keep up with maintenance and that's all before you decorate to suit your tastes.

    The other thing is that house prices are not what they used to be. For us, our house was worth $50,000 over what we paid within 18 months and is now, 10 years later, worth about 2.5 times what we paid for it. But it's unlikely there will be market increases like that in the next 10 years. It's much more likely in this current climate that if you need to sell in 1 - 2 years time you could end up losing money. That's bad, but imagine having to sell your house and then still having a $50,000 LOAN to pay off after you sell the house. My brother & sister-in-law bought 2 years ago and their house is worth less than they paid for it. Things change with jobs/family/all sorts of things and although for you moving again in 2 years time seems unlikely now, but it's not going to be a complete impossibility.

    All the best for your decision.

  10. #10
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    I didn't know anyone did these anymore after the GFC. Who does?

    If you have to pay higher interest than a standard loan I wouldn't do it. You will end up paying thousands extra in interest. I know you said renting is throwing money away and I agree, but pay higher interest than necessary is the same thing.

    Don't forget to calculate legal fees, stamp duty and mortgage lenders insurance in your buying costs too...

    Best of luck!


 

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