No Deposit Home Loan for Investment Property
Everyone understands the importance of investing in one’s future.
With today’s rising costs of living and increased property values, investing in property can be difficult. Property investing is one of the most secure and rewarding forms of investment, but unfortunately, many people have difficulties raising the capital needed to become involved in property investment projects.
One of the major difficulties in this process is raising enough money for a deposit. Enter no deposit loans. These loans allow you to borrow the entire purchase price of the property if you qualify. This leaves only the costs of LMI, the stamp duty, and the legal fees to raised by you. With a no deposit home loan, anyone can enter the potentially rewarding field of property investing.
Featured No Deposit Home Loan
Fox Symes Home Loans offers a range of competitive solutions to refinance your home loan. Simply fill out a free home loan consultation online and you will be assisted in finding the best home loan and interest rate in the market.
- Interest Rate of 5.99%
- Comparison Rate of 6.01%
- Application Fee of $Varies
- Maximum LVR With LMI: 95%
- Minimum Borrowing: $500,000
- Maximum Borrowing: $2,000,000
Benefits of a No Deposit Home Loan
Other than not having to raise the money for a down payment on a property, no deposit home loans have other benefits as well. For the professional property investor, returns come from being able to earn payments from more than one property, so it is beneficial to these investors to own more than one investment property. Unfortunately, the high cost of placing a down payment on a single property can result in an investor running short of funds. A no deposit home loan lower the cost of a single property, which can free up the investor’s cash for the purchase of other properties. For the investor, more properties means more returns.
Another benefit of no deposit home loans are the possible tax benefits. For the majority of property investors, paying a large percentage of their income to taxes is an unfortunate reality. Purchasing an investment property can help to reduce what you owe in taxes by allowing you to leverage the property. If you are able to purchase a property sooner rather than later, then all the better. A no deposit home loan will speed up the process of purchasing an investment property because you do not have to raise the extra cash for a down payment, therefore, allowing you to reduce your tax bill immediately.
Every property investor needs some capital to put towards their investments. By borrowing the complete cost for a property, an investor will not have to use their saved money for a down payment. This means that they are free to use their saved cash for other purposes. This means cash will be available for renovations, more property purchases or for any other use the investor will require. Freeing up extra saved cash is not the only benefit of a no deposit loan, they also allow the investor to avoid using their other equity for property purchases. This means that by borrowing the complete amount due for a property, the investor doesn’t have to use their personal home or property as equity, nor do they have to gain loans from several different lenders. This makes the entire property investing process simpler and easier.
What Kind of Properties Can Be Purchased With a No Deposit Loan?
Most types of properties can be purchased with a no deposit loan but there are several exceptions. For example: certain types of property locations can play a role in whether or not an investor can secure a no deposit loan. The smaller the town or city, the harder it may be to get this type of loan. Also, property areas with economies that are struggling may make the process harder.
For areas such as this, it may not be possible to borrow the 100% of the properties value, but it may still be possible to borrow up to 95%. There are also several specific types of properties that cannot be purchased with this type of loan. Some of these properties can include multiple dwelling units such as retirement communities, student housing, multiple apartments and rural areas. This is because these specific property types can be extremely hard to finance. It is best to double check if you will be able to secure this type of loan before the purchase is made. Many of these property types may be purchased on a case by case basis.
First time purchasers of a property may also qualify for a no deposit home loan if they are able to show a decent financial position. It is not required that a first time buyer show savings or assets to qualify for this type of loan. If the buyer will not be living in the property they may not qualify for the first home owners grant, but can receive this grant later if they do decide to purchase a home to live. It is best to check with the local state government to be sure.
What Cash is Required to Get This Type of Loan?
While a no deposit loan covers 100% of the cost of the property, it doesn’t cover all of the extra costs that often come up when purchasing a property. Some of these extra costs can include things like inspection costs, pest inspections, conveyancing costs, the stamp duty and LMI or Lenders Mortgage Insurance. It is vital that the investor take these extra costs into account when figuring out the costs of their deposit. In general, an investor should expect to pay about 8% of the total cost in extra fees before the purchase is complete.
There is however, the exception of a quick start investment loan. These loans allow the investor to avoid paying the LMI or Lenders Mortgage Insurance. This requires that the investor take on the risk themselves, and in turn they will be charged a larger interest rate. The investor can then expect to pay only 4-5% of the total price, but at a higher interest rate. This type of loan may be reverted back to a lower rate in some time. Overall, the quick start loan costs end up being similar to a loan acquired with the LMI costs attached, but allows the borrower to put down a smaller deposit.
Can The Loan Be More to Pay The Extra Costs?
It is possible to receive a no deposit loan for more than the total cost of the property in order to pay the extra costs such as the LMI and stamp duty. However, borrowing more than 100% of the cost will require that the investor have some additional security. This additional security doesn’t have to come from a personal property, but it may have to come from some form of property. In many cases, an additional security property can come from another source such as a relative’s property.
How About The Interest Rate For This Type of Loan?
The interest rate for a no deposit loan is typically the same as a regular home loan. A quick start loan may have a higher interest rate, but the cost will not include the price of the LMI. In general, it is possible to get a no deposit loan with an interest rate at market value.
How Do You Qualify For a No Deposit Loan?
In order for an investor to qualify for a no deposit loan, they must have at least $100,000 in certain assets such as property, shares or liquid cash, or 20% equity in a home with a minimum value of $50,000. These terms may not apply to investors with very large incomes. The investor doesn’t have to live in the property if this is their first purchase, but additional qualifications may needed if an investor is looking to purchase a property they do not intend to live in. Additional property guarantors do not have any equity requirements. It is wise to contact a mortgage broker to determine whether or not you will qualify for a no deposit loan.
Related posts:
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- Investment Property Financing
- Investment Property Cash Flow
- Savings Up For an Investment Property Deposit
- 4 Key Considerations When Buying an Investment Property
- HSBC Investment Property Home Loan – Buying Investment properties with HSBC
- No Deposit Home Loans
- Investment Property Tips ‘n’ Tricks when Selecting a Home Loan
- How to Refinance an Investment Property Loan
- Westpac Fixed Rate Investment Property Loan
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