How to purchase a property with no deposit
Did you know that it is possible to purchase a property with no deposit?
If you have a family member or friend that owns a property, they can offer this as an additional security to your loan which can allow you to borrow 100% of the property purchase price + associated costs such as stamp duty and legal fees. This is known as a security guarantee.
The guarantee is structured so that the guarantorâ€™s liability is limited to a specific amount and, at the request of either the borrower or the guarantor at any time during the loan term, they can ask to be released from the guarantee.Â Generally this is done when the loan balance is less than 80% of the value of the primary property.
Other benefits include:
- You may be able to buy your home or investment sooner since you are not required to save the full deposit.
- Potentially avoid paying Lenders Mortgage Insurance (LMI) which can save you thousands.
- Guarantors can determine what portion of the loan they will secure.
Before deciding to offer their property as security a guarantor needs to be aware of the risks associated should you default on your loan. A number of lenders will require the guarantor to obtain independent legal advice prior to signing their loan documents.
If you would like more information on loans involving a security guarantor, please contact Brock Lawton on 02 9545 5363.