Will a Low Deposit Loan Benefit Me in the Long Run?
The standard deposit to obtain a home loan remains 20% of the amount borrowed. It’s a challenge for some groups to save that amount. Alternatives to a down payment exist, including a low deposit loan.
There are pros and cons to the low deposit loan. We offer a few key points to help you make a decision and the best mortgage choice.
First and foremost, the low deposit mortgage opens the homeownership door to individuals who haven’t saved that much. Individuals who just started their career, are still young, or recently married face the down payment as a real challenge. The lending sector recognises that a significant sector of the public is historically shut out of homeownership. So, variations of the 30-year mortgage have been released.
Lenders request a down payment to ensure that the applicant has skin the game. If you put down $100,000 upfront, you’re less likely to walk away from the house if things get tough. A low deposit poses a risk. To balance the risk the lender offers a higher interest rate. A low deposit mortgage is more expensive than a mortgage with a 20% down payment in the long run. If it’s the only way you can become a homeowner soon, the extra cost is worth the price.
Low Deposit Loan Conclusion
For more information about the low deposit loan, contact our loan specialists at Mortgage House. They go over the details and how it impacts you in the long run. It’s a suitable loan option for some individuals. For others, there are better alternatives.