A close look at options available to get finance to cover all the costs of buying a property, right here with Savvy.
Fact checked
There are many additional costs involved in buying a property over and above the purchase price. Stamp duty alone can amount to tens of thousands of dollars. The idea of 106% home loans is to cover all the costs related to buying a property, so the borrower doesn’t need any savings for the deposit or stamp duty. Savvy looks at 106% mortgages and the alternatives available to borrowers with a very small deposit (or even no deposit at all) so you understand your options.
Before the Global Financial Crisis (GFC) in 2007 and 2008, some banks were prepared to loan the full cost of a property purchase, including the amount typically required for a deposit, plus the cost of stamp duty. These were known as 106% home loans because they covered the full purchase price of a property plus an extra 6% to cover additional costs.
However, since the GFC, banks no longer lend the full amount of a property’s value plus the cost of stamp duty, so borrowers have had to find other means to finance their property purchase. This has led to the guarantor home loan with no deposit rising in popularity amongst first homebuyers. With a guarantor home loan, you can not only contribute no deposit but also borrow more than the purchase price, potentially as much as 110% in some cases.
If you agree to be a home loan guarantor in Australia, you may have to be prepared to take on the full cost of the guaranteed loan if your relative becomes unable to make the loan repayments. However, some lenders do offer limited guarantor loans, which specify the dollar amount the relative is prepared to be liable for. As part of the agreement, a guarantor uses some of their home equity as security for the loan, meaning that it’ll be secured by two properties instead of one (known as cross collateralisation or securitisation).
Most lenders ask that a guarantor be a close relative, such as a parent, grandparent or sibling. However, some lenders have less strict criteria for guarantors and will accept more distant relatives or even unrelated friends as guarantors.
The additional expenses you’ll need to budget for over and above the purchase price of your property include:
Some of the other options you have available to get a home loan if you only have a small deposit include:
If you’re looking for ways to finance your investment property with no deposit, your options include all of the above, plus using the existing equity in your home as the deposit for your investment property purchase. This means your lender will use both your investment property and your existing home as security for your loan (another form of cross collateralisation or securitisation), as is the case with a guarantor loan. You can do this by:
Savvy can help you compare loans and their interest rates, so you have the most up-to-date financial information to help you make the best possible loan decision.
There are many government assistance schemes available for first homebuyers which can help with the cost of buying a home for the first time:
Quantum Savvy Pty Ltd (ABN 78 660 493 194) trades as Savvy and operates as an Authorised Credit Representative 541339 of Australian Credit Licence 414426 (AFAS Group Pty Ltd, ABN 12 134 138 686). We are one of Australia’s leading financial comparison sites and have been helping Australians make savvy decisions when it comes to their money for over a decade.
We’re partnered with lenders, insurers and other financial institutions who compensate us for business initiated through our website. We earn a commission each time a customer chooses or buys a product advertised on our site, which you can find out more about here, as well as in our credit guide for asset finance. It’s also crucial to read the terms and conditions, Product Disclosure Statement (PDS) or credit guide of our partners before signing up for your chosen product. However, the compensation we receive doesn’t impact the content written and published on our website, as our writing team exercises full editorial independence.
For more information about us and how we conduct our business, you can read our privacy policy and terms of use.
© Copyright 2024 Quantum Savvy Pty Ltd T/as Savvy. All Rights Reserved.
© Copyright 2024 Quantum Savvy Pty Ltd T/as Savvy. All Rights Reserved.
Quantum Savvy Pty Ltd (ABN 78 660 493 194) trades as Savvy and operates as an Authorised Credit Representative 541339 of Australian Credit Licence 414426 (AFAS Group Pty Ltd, ABN 12 134 138 686). We are one of Australia’s leading financial comparison sites and have been helping Australians make savvy decisions when it comes to their money for over a decade.
We’re partnered with lenders, insurers and other financial institutions who compensate us for business initiated through our website. We earn a commission each time a customer chooses or buys a product advertised on our site, which you can find out more about here, as well as in our credit guide for asset finance. It’s also crucial to read the terms and conditions, Product Disclosure Statement (PDS) or credit guide of our partners before signing up for your chosen product. However, the compensation we receive doesn’t impact the content written and published on our website, as our writing team exercises full editorial independence.
For more information about us and how we conduct our business, you can read our privacy policy and terms of use.
