What Is a Low Deposit Mortgage?
Potential borrowers ready to purchase their first home may not understand the loan and mortgage options available to them, such as low deposit mortgages. A low deposit mortgage allows borrowers to break into the Australian property market for the first time without paying a large deposit generally required by banks, lenders, and mortgage brokers. Low-deposit mortgages can result in good and bad financial situations depending on the individual borrower, so completing accurate research and financial planning prior to applying is essential.
As we mentioned previously, low-deposit mortgages can help a first-time homebuyer get into the property market with limited financial resources. In addition, low deposit mortgages can help with wealth building by getting a borrower out of paying rent and housing bills in a home that does not belong to them.
Low-deposit mortgages can damage a homeowner’s financial situation due to the potential of exceedingly high-interest rates. Generally, low deposit mortgage policyholders will be required to pay Lender’s Mortgage Insurance because of the riskiness these policies present to lenders.
The low deposit mortgage application process is similar to other mortgage applications, so potential borrowers will want to verify they have up-to-date financial information to speed the process along. Credit scores should be regularly monitored and, if possible, consistently improved upon. Lenders must perform credit checks on applicants to determine eligibility and borrowing amounts.
Interested in applying for a low-deposit mortgage? Our Mortgage House lending specialists can help potential borrowers identify and plan for financial goals, determine the best mortgage rates, and create a functional mortgage repayment plan.