Can I Get a Mortgage with a Low Deposit?
While most Australian mortgage lenders prefer a deposit of between 10 and 20%, you can secure a home loan with a lower deposit. Known as low deposit mortgages, these loans often have higher interest rates, require you to pay lender’s mortgage insurance, and have stricter lending requirements. However, low deposit home loans are beneficial for first-time home buyers and young Australians who are newly independent.
Basics of a Low Deposit Home Loan
Low deposit home loans are often considered riskier by lenders. Therefore, not only is the interest rate usually higher than traditional home loans, but most banks have stricter lending criteria. Depending on the lender, you may have to prove the following:
- You are steadily employed and have sufficient income
- The purpose of the loan, that is, you are buying a home, refinancing your current home loan, or are building a home.
- Your property is in a low-risk area and is owner-occupied
- You have a good credit history with very few or no missed repayments and debt
Some lenders may also require you to have at least 5% of your property’s value in genuine savings. You will also be required to pay lender’s mortgage insurance on your home loan. This insurance is applied automatically to home loans with a deposit of 20% or less.
While it is possible for you to secure a mortgage with a low deposit, it can be challenging. At Mortgage House, we make the process as simple as possible. We can help you improve your loan application and help you secure a home loan with beneficial loan features and interest rates as competitive as traditional home loans.