Getting a low deposit loan can be a great way to fast-track your path to home ownership. A lower deposit means you need less money upfront, so you can get started sooner. For example, deposits for a HomeStart Low Deposit Loan
start from as little as 3% of the property price.
However, while paying less deposit has it’s advantages, there are some common myths about what a low deposit loan really means. Here are three myths busted.
Low deposit doesn’t mean no fees
While your deposit might be a large part of what you need to pay upfront when you buy a home, it’s by no means everything. On top of a deposit, you also need to have enough cash to cover a whole range of fees and charges.
Even if you are eligible for a low deposit option, you may be looking at tens of thousands of dollars for your upfront costs.
And remember, low deposit doesn’t mean no deposit. Even a low deposit of 5% on a property in South Australia which costs the median house price is almost $20,000!
Use an online calculator
to get an indication of what you might be up for.
Low deposit doesn’t mean no savings
Before a lender can give you a loan, they will want to see evidence that you can save money on a regular basis. Even if you borrow with a low deposit loan, typically you’ll be required to have held a certain amount of savings for a period of time, to show you’re capable of managing your money and will be able to make repayments.
For example, at HomeStart we require customers to show us that they have saved at least $3,000 in a savings account over three months.
If you have a good rental history and can show you’ve paid your rent on time over a 12 month period, you can use this in lieu of savings evidence.
Low deposit doesn’t mean low doc
Taking out a low deposit loan might make it easier to get started in the market, but you will still need to go through the standard process for taking out a home loan. That means having all the right documentation, so your lender can verify your details.
Low doc loans are not right for every customer, as they can make it easy for important details to be missed and potentially, for someone to get in over their head with a home loan.