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Read our Mozo Review to learn more about this Macquarie Basic Home Loan
BCU Bank’s OMG owner occupied home loan offers a variety of great low rates depending on your deposit. Save with no ongoing annual fees. Access your extra payments when you need to through the redraw facility. Pre-approval valid for 3 months.
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Get a flexible loan structure with up to six loan accounts with different rate types. Make free extra repayments. Enjoy free redraw facility. No upfront or ongoing fees. Option to earn Qantas points.
Read our Mozo Review to learn more about this Macquarie Basic Home Loan
Read our Mozo Review to learn more about this Macquarie Offset Home Loan
Refinancers or first home buyers pay no monthly or annual fees. Up to $3,000 cashback when you complete your home loan application online. $2,000 cashback on loans ≥$250K; or $3,000 cashback on loans ≥$500K. LVR ≤80%. T&Cs and credit criteria apply.
Read our Mozo Review to learn more about this Newcastle Permanent Special Real Deal Home Loan
Read our Mozo Review to learn more about this Macquarie Basic Home Loan
Read our Mozo Review to learn more about this Macquarie Offset Home Loan
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The standard for home loan deposits in Australia is 20% of the property’s purchase value, but for those struggling to save for their first deposit, it’s possible to opt for a low deposit home loan.
With a low deposit home loan you only pay around 5-10% of the property’s value, instead of the typical 20% deposit.
Low deposit home loans have some drawbacks, including higher interest rates, stricter lending criteria and the added expense of lenders mortgage insurance (LMI) in some cases.
The upside of a low deposit home loan is that it gets you on the property ladder sooner, which may be particularly helpful for first home buyers, or anyone looking to get ahead of potentially rising property prices.
A low deposit home loan means you’ll have a high loan-to-value ratio (LVR). Your LVR refers to the amount of money you need to borrow in proportion to the property’s value.
Lenders typically want you to have a home deposit of at least 20%, which gives you a loan-to-value ratio of 80%. If your LVR is more than 80%, it’s likely you’ll be deemed a riskier borrower and may need to pay a higher interest rate.
This is important to keep in mind with low deposit home loans – if you’re taking out a mortgage with an LVR of more than 80%, you might pay more interest in the long run. You may also need to pay lenders mortgage insurance.
Low deposit home loans of under 20% generally require you to pay lenders mortgage insurance.
It’s a type of insurance that protects the lender if you’re no longer able to meet your home loan repayments, but it’s a cost the lender passes on to you.
The cost of LMI will depend on the amount you’re borrowing and your LVR.
There are ways to avoid paying lenders mortgage insurance, such as government home loan grants that can waive the cost of LMI you’d typically have to pay, even if you have a deposit as small as 5%.
Other ways to avoid paying lenders mortgage insurance include asking a family member about going guarantor on your home loan or using a substantial cash gift.
Lenders mortgage insurance can be paid in a one-off instalment, but it’s often lumped into the overall cost of your home loan so you pay it off over time. While this spreads out the cost over time, it means it will also accrue interest.
LMI doesn’t protect you if you can’t meet your mortgage repayments, so you would need to take out income protection or mortgage protection insurance to cover you in case of illness. injury or redundancy.
A low deposit home loan can be a helpful way of getting into the property market, but higher interest rates and LMI are added expenses that can be a deterrent.
However, if you’re a first home buyer in Australia, you may be eligible for First Home Owner Grants (FHOGs) or other first home buyer schemes.
With the First Home Guarantee, for example, the Australian government acts as your guarantor. This means the government provides additional security by adding to your home loan deposit.
Keep in mind that the government’s home loan schemes are kept to participating lenders, so you’ll need to check that your mortgage provider is participating. Income limits also apply and not everybody is eligible.
If you’re looking to get into the property market now, whether as an investor or first time home buyer, here are some advantages to getting a low deposit home loan:
While a low deposit home loan can be useful for borrowers looking to get on the property ladder early, there are some drawbacks that you should consider:
You can estimate your repayments with Mozo’s free home loan repayments calculator.
Just plug in your loan amount and term and our calculator will instantly tell you what your monthly repayments will be so that you can begin budgeting.
The application process for a low deposit home loan can involve a fair amount of preparation. Generally, you should check you have your documentation in order, such as:
It’s a good idea to do your research for the loan you’re looking to get, as there are other costs associated with a home loan such as stamp duty and legal fees.
Yes, there are various lenders that will allow you to take out a home loan with a deposit as low as 5% (which gives you a 95% loan-to-value ratio).
According to the Mozo database, borrowers with a low deposit will be able to pick between a variety of big banks, credit unions and online lenders, though the interest rates on offer vary greatly.
Low deposit home loans usually come with the same features as standard home loans, but they tend to have higher interest rates and stricter lending criteria.
Low deposit home loans can come with the standard fees you’d pay for with a typical home loan, including application, property valuation, settlement and service fees.
You may also need to pay lenders mortgage insurance (LMI), unless you’re eligible to buy through a government home loan grant.
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I would suggest shopping around. I went with one of the big 4 because it was a trusted brand and I have had nothing but trouble. Constant miscommunication - due to a bank error I missed out on a fixed portion of my loan. They take no accountability for their mistakes and except you to just deal with it.
Read full reviewI would suggest shopping around. I went with one of the big 4 because it was a trusted brand and I have had nothing but trouble. Constant miscommunication - due to a bank error I missed out on a fixed portion of my loan. They take no accountability for their mistakes and except you to just deal with it.
I've had a CBA account since I was in primary school, all of my experiences with them on a personal level have been positive. Our current home loan has been refinanced with CBA, the options and drawbacks of each mortgage type are clear on the website and in the PDF options. Not being able to have an offset account with a fixed rate is the only drawback I've found, but it *did* allow us to lock in a lower rate than other banks. CBA were also one of the only banks that allowed us to finance our home with a 10% deposit.
Read full reviewI've had a CBA account since I was in primary school, all of my experiences with them on a personal level have been positive. Our current home loan has been refinanced with CBA, the options and drawbacks of each mortgage type are clear on the website and in the PDF options. Not being able to have an offset account with a fixed rate is the only drawback I've found, but it *did* allow us to lock in a lower rate than other banks. CBA were also one of the only banks that allowed us to finance our home with a 10% deposit.
Bankwest offers user-friendly digital services, competitive rates, and helpful customer support, making banking convenient. However, some may find limited branch locations a drawback. Be aware of potential fees and ensure their product offerings match your financial needs before committing. Overall, it's a solid choice for tech-savvy users.
Read full reviewBankwest offers user-friendly digital services, competitive rates, and helpful customer support, making banking convenient. However, some may find limited branch locations a drawback. Be aware of potential fees and ensure their product offerings match your financial needs before committing. Overall, it's a solid choice for tech-savvy users.
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