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Getting a 100 percent home loan to fund your property can be difficult. While some lenders may allow you to borrow up to 95 percent of the purchase price if you can show at least 5 per cent genuine savings and agree to pay Lenders Mortgage Insurance, 100 percent home loans are almost extinct in Australia now.

 
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Does that mean you cannot buy a home, even if you could service the home loan, but don’t have a deposit? Well, with a little bit knowledge and planning, nothing is impossible. Many Australians continue to borrow over 100 percent of the purchase price of their property, thanks to parental guarantee loans, which are increasingly becoming popular with Gen Y, considering the soaring property prices, and consequently, the deposit amount.

“There are ways of getting a 100% + costs loan, and these are usually obtained by using an immediate family member’s existing property as security or collateral. They are called a family guarantee or family pledge loan,” explains Glenn, an expert broker on the HashChing platform.

Scott, another mortgage broker on the platform, adds: “If you are a First Home Buyer (subject to state), you can use just the FHOG to purchase a brand new property around the $400k mark. You can purchase a property with as little as 5% deposit + costs (approx $3k). If you are using another property as collateral (like a parent as a guarantor), then you can borrow the full purchase price, and in some cases, costs and minor debt consolidation.”


Borrowing 100% with Guarantor Home Loans

A study of 1,700 Australians revealed that “86 percent of parents provide financial help to their adult children, with lending money and cash handouts being the most popular ways they contributed financially.”

A guarantor home loan or a family pledge loan can help you secure more than 100 percent of the property’s cost, covering some of the accessory costs as well. In this kind of a loan, the lender, apart from securing the home loan against your property, also takes additional security over the guarantor’s property. Thus, if you are unable to service the loan in the future, the guarantor is liable to make good the repayments up to the amount specified in the guarantee.

(Read more about Guarantor Home Loans here)

Guaranteed home loans are limited to parents or close family relations. However, some lenders may allow siblings or spouses to act as guarantors, too. (Read more to understand the implications of going guarantor for a home loan.)

“Investing in property is a wise move, but difficult to achieve. With rising costs, saving hundreds of thousands of dollars for a deposit is certainly a struggle. I turned to my parents to guarantee my loan so that I could break into the property market without having to wait to save up a deposit,” says Ane, a young architect who recently used our services to secure a home loan. In fact, several youngsters across Australia have realised their property buying dreams with a little help from their parents.

Even if you have a guarantor to back your loan, some lenders still require proof of genuine savings for at least 5% of the property price. In case you are a tenant, you could use your rental history instead of genuine savings to get approved for a home loan. Get in touch with an expert to know more.

Family guarantee home loans remain one of the few options that allow you to borrow 100 percent (or more) of your property’s cost. However, the lending criteria differ from lender to lender. A mortgage broker will understand your financial condition and refer you a lender in line with your requirement, saving you time and money. At HashChing, we have an extensive database of verified brokers who have access to competitive home loan deals (compare mortgage rates online) from 60 lenders across Australia. Speak to an expert online, or fill in the form below and we will put you in touch with one.

 

By Vidhu Bajaj
HashChing Content Writer

 

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HashChing is helping Australians by providing access to the pre-negotiated home loan deals. Obligation free consultation with one of our partner brokers might save you time, hassle and money.