In my experience, these “No Deposit” offers require the purchaser to set up a payment program where they spend the next 2-3 years paying into an account to build up the required deposit. They are locked into this agreement, with potential risk of losing any money paid if they wish to get out. In most cases they are also locked into a specific property which increases in cost the longer it takes to reach the required deposit. So in the end, you’re better off just being disciplined and saving the money yourself.
Regardless of whether or not the land owner or builder are happy to forego a full 5% deposit, the lenders in Australia will always want to see a deposit. The current minimum deposit for Australian lenders is 5%, because they will only lend up to 95%.
Potential purchasers also need to account for stamp duty. A rough guide here is 5% of the land (if building) or 5% of the house cost (if purchasing established). So as a general rule of thumb, home owners need 10% of the house cost, minus any stamp duty concessions or grants they are entitled to.
In the end, seek professional advice from a local broker before you consider making an offer. It’s very important to know your numbers (borrowing capacity, deposit required, potential loan repayments) and your broker will help you work through these figures to find what’s comfortable for you.
David Thurmond – Mortgage Choice Berwick http://www.mortgagechoice.com.au/david.thurmond/
