You may have heard about no deposit home loans, but do you really know what they are? How do they work, and what do you need to do to qualify for one? With so many different financing options available today, it can be quite confusing trying to understand them all. However, this guide explains what a no deposit home loan is so that you can determine whether or not it may be an option for you.
Who Can Benefit from a No Deposit Home Loan?
Basically, a no deposit home loan is a loan that covers the entire cost of a new home. In a traditional mortgage, banks demand that the borrower pays a deposit, which is typically about 10 to 15 percent of the full value of the loan. Unfortunately, not everyone has 10 or $20,000 just laying around.
This leaves people with few options. Of course, they can choose to move into a cheap rental and try to save up the money. However, this could take several years depending on the deposit you need to pay to the bank. This is where a no deposit loan comes in handy. With one of these loans, you do not have to spend years saving up a deposit.
Requirements of a No Deposit Home Loan
Although a no deposit home loan enables aspiring home owners to borrow 100 percent of the price of a home, the requirements for these loans are a bit more stringent than those for traditional loans. Listed below, are some of the most common criteria that borrowers will need to meet to qualify for one of these loans.
- High Income/Salary
- Near-Perfect Credit
- Mortgage Insurance Rate Fees, Loan Fees and Stamp Duty
- High Exit Fees
- High Interest Rates
- House Type Restrictions
Benefits of No Deposit Home Loans
People who think they can meet the above requirements will enjoy many benefits with a no deposit home loan. Since they do not have to save up a large deposit, they can move into their new home quickly. They do not have to spend several years renting a house and throwing their money out the window.
Additionally, they do not have to worry about landlords and lease restrictions. They can redecorate or renovate whenever they may choose. They also do not have to worry about jumps in rent or becoming evicted from their home. Thus, not only do no deposit home loans offer people the opportunity to purchase homes when they otherwise could not, but these loans can also give them a great sense of security.