Can I borrow my down payment for a house? Is it possible to borrow money to put towards my house deposit?
These are questions that we hear often when people first contact us. Understandably, because saving for a deposit is not easy. With the current cost of living and housing prices in most Australian cities, it has become harder and harder for many first home buyers to buy or build a house. Many Australians are stuck trying to save up a high enough deposit for a home as the goal posts keep moving.
There are many challenges that a first home buyer faces, but luckily there are also many solutions. It is, in fact, possible to get a home loan with a low deposit or without a deposit entirely! We have put together a list of financial alternatives for first home buyers who are ready to get on the path to home ownership but have a zero deposit.
One way to enter the property market without savings is to take a personal loan to cover the deposit. While it is technically possible to do, it is also quite uncommon because it just isn’t that easy. To go down this route, the borrower would have to have a high enough income to be able to make repayments on both the personal loan and the home loan, as well as little to no debt and a spotless credit history. Other conditions may also apply based on the lender and the situation.
One way to get a home loan without a deposit is having a guarantor who either co-signs the loan or provides the deposit. The popularity of this arrangement has increased in the past few years, which speaks volumes of how many young people are struggling to get a foot on the property ladder.
So, who can be a guarantor? Most often the guarantor is a property owner who agrees to pay back the loan if the borrower were to fail to do so, using their own home or savings as security. A guarantor is usually a parent or another relative. The downside of this arrangement is, if things go wrong, you might be putting your family members at financial risk. And what if you don’t have anyone who could act as a guarantor? Not to worry, there are other alternatives!
Using Superannuation as Deposit
In 2017, the Australian federal government decided to make it possible for first home buyers to start putting aside money for a deposit directly from salary to their superannuation account. However, this needs to be set up specifically and it is not possible to take money out of your current super. This might be a worthwhile solution for those who have time but struggle to save, but not for the buyers who are keen to buy a home sooner rather than later.
First Homeowners Grant
Many people don’t seem to know this, but the First Homeowners Grant can be used towards your deposit! The First Homeowners Grant is a national scheme where buyers that plan to live in the property they’re buying (for a certain time period anyway) might qualify for a financial boost. The grant is different in each state and territory, so check what the practices are in your home state. The great thing about the grant is it’s not even borrowed money – it’s funding the states and territories give you!
The downside, you ask? Unfortunately, the grant itself is usually not enough to cover the deposit. Besides, if you’re planning to build a home the grant is only available after building has started. However, although it might not solve all your problems, it’s good to keep the grant in mind as something you might qualify for to pave your way towards home ownership.
Low Deposit Programs
With all the difficulties first home buyers are facing, low deposit programs have become an increasingly more popular option for first home buyers with little savings. These are programs where new property developers offer to loan buyers the missing deposit. To be able to join a low deposit program, a good financial track record (on-time payments for rent, credit cards, etc.), clear credit history as well as steady employment and income is usually required.
The biggest benefit of low deposit home loan programs is getting into the property market and beating the rise in property prices. A low deposit program is a great way to get past the deposit hurdle and start putting your money towards owning your own home.
Test If You Qualify for a Low Deposit Program Today
With the lack of affordable housing in Australia, the traditional way of saving up a 20% deposit is easier said than done, but luckily first home buyers aren’t limited to one way of entering homeownership anymore. Our low deposit program is one way to borrow money for a house deposit and get on the path towards owning your own home.
Take our pre-qualifier quiz to see if you can qualify!