Gather Your Deposit
One of the most common questions in the home buying process is how much deposit is needed for a home loan. When it comes to deposits, the more the better. You may be familiar with the ideal 20%. A larger deposit will help you avoid paying low equity fees/lenders mortgage insurance and also opens up additional types of loans and lenders accessible to you. This not only gives you the most competitive rates but it also means you don't have to pay extra interest down the track. Whilst it is still possible to get a home loan with a much smaller deposit there are a number of possible ways to maximise your deposit.
Most banks like to see evidence of genuine savings when applying for a mortgage, which means you will need to have the deposit in your account for a minimum period of time and often up to 5% needs to be from accrued savings. However, if you acquire money that hasn't been saved in this way and want to use it towards your deposit, a Mortgage Link Adviser will be able to provide options from lenders that accept these deposits.
Bank of Mum and Dad
A guarantor is someone who will offer their own assets as collateral for the loan. Parents often offer to be guarantors for their children to help them into their first home. The guarantor will determine what portion of the loan they will secure, usually it will be for the part of the deposit you don’t have. This guaranteed portion will usually be secured over their property, much like putting a ‘hold’ onto their existing equity until it is paid back.
A guaranteed home loan means you may be able to buy your home sooner than expected and maximizes the amount you can borrow, you can expect great interest rates/fees and possibly a bank cash contribution. However this is a big decision as the guarantor is liable to pay if you default on your loan which means you need to be absolutely sure you will be able to meet your mortgage repayments.
Low Deposit Home Loans
If you have considered the above options and still struggling to meet the ideal 20% deposit, the good news is that there are still some great options. You may be able to apply for a First Home Loan which a product supported by the Government and operated by Kainga Ora – Homes and Communities which allows for lending with 5% deposit.
Your Mortgage Link adviser will be able to discuss all of the above options to see if any would be suitable for your circumstances and help you with any further information required or getting application process underway.
How Much Can I borrow?
Wanting to find out how much you can borrow and what the resulting repayments will look like? You can often get approval to borrow more than you can actually afford! New home buyers forget about extra costs such as rates, extra insurances, repairs and maintenance or body corporate fees. So we’ve created this handy mortgage calculator to give you an idea on how much you can comfortably afford to borrow. Alternatively, you can use it to see how the amount changes depending on how the term, interest rate or total mortgage amount changes for instances such as increases in interest rates or if your income decreases.
Your Mortgage Link Adviser will be able to further advise on the above and even offer solutions as to how you could pay off your mortgage faster!
Once you’ve got your deposit and are ready to start house hunting, the next step in the process is to get pre-approval. This can help cut down stress and organizing time, as you will know just how much you can afford to borrow and the price range for your search. You will be in a better position to negotiate a good price on the property you intend to purchase and confidence if bidding for a property by auction.
Whilst the pre-approval sets the benchmark, you will still need to find a property that the lender is happy with. For this reason it pays to double check with your adviser before you sign a contract or go to auction for a specific property. Contact a Mortgage Link adviser to help organise your pre-approval.
Ready to get going? Find an adviser today!