No Deposit Home Loans: The Basics

You might have heard of no deposit home loans, but you're probably still a little unsure about the details. How do they work, when banks generally demand money up front? How are they different from other approaches to home financing? With so many financing options available to you these days, it can be easy to become confused. This guide aims to get to the heart of the key questions to help you decide whether this sort of mortgage option is right for you, and to help you get the home you want as quickly as possible.

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So what is this type of loan? Essentially, it is a loan that covers the full cost of your new home. Now, you might be wondering how that differs from a normal mortgage, but you have to remember that any bank will demand that you make some sort of deposit on a loan that size. In short, they won't lend you the full value. Instead, they will demand that you pay 10-15 percent in a lump sum before they loan you the remainder. In theory, that is designed to demonstrate your commitment to both the property and the loan.

That is more than a little patronising. Because you don't happen to have tens of thousands of dollars in your bank account, you aren't serious about wanting to get on the property ladder? That makes no sense. It is simply the banks wanting to lend you as little as possible. The idea that you are somehow a greater risk is ludicrous when you could make the repayments on a loan easily, and the only thing getting in your way is the fact that your current rent keeps you from saving a lump sum.

That is where a loan for the full value comes in. Because you don't have to spend your time saving up a deposit, you can be in your new home quickly and without hassle. You don't have to spend years renting while you save, and you don't have to take tightening your financial belt to ludicrous extremes. Better yet, you aren't wasting the money you pay out each month. Money you spend on rent is gone. Money you spend paying back your loan, on the other hand, moves you steadily closer to full ownership of your property.

In the meantime, you don't have to worry about the usual problems with landlords. You can keep a pet without having to ask permission. You can redecorate and renovate to your personal tastes. You don't have to worry about unexpected rent hikes, or the property being sold from under you. In that sense, this is an option that gives you far greater security.

More than that, it gives you a home. Rented properties are places you stay, but for a real feeling of stability, you need to buy your own home. No deposit home loans give those who can meet the repayments the opportunity to do that without having to waste time and money while they jump through the hoops the banks demand.

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