A few years ago, many of us would have had a light chuckle to ourselves if someone mentioned that you could borrow money to buy a house with only the promise of solid future earnings. But today this is a regular occurrence. Many of the industry's non-conforming lenders are selling these financial products to many happy consumers, with most of the major banks avoiding this riskier route.
Ideally, the individuals set to gain from this product have high incomes in industries with high job security. With this loan you are presuming that the benefits of immediate ownership and debt outweigh the costs of renting. This may not always be the case however. The risk to the lender is greater and so you will pay a premium interest rate for the privilege, usually about 2% higher than the current market rate.
With this is mind, it may be time to clean the dust of the old mortgage calculator and assess the long term financial gain or speak to a financial consultant to establish whether this is a sound option for you, and for many people it can be.
Of course, there is no such thing as a free lunch and strictly speaking, no deposit means "with enough money to cover initial expenses" such as stamp duty, loan fees and mortgage insurance. If you are lucky enough to be eligible for a government first home buyers' grant, you may have most of these expenses paid for you.
The main point with this type of loan is that to really win you are betting that your salary will be increasing steadily over the term of the loan. This income will then be able to be ploughed back into the loan to build some equity.
In many countries, such as Australia, no deposit home loans are becoming less attractive due to the state of the market. Lenders are becoming more stringent with their loan acceptance policies, indicating a potential interest rate rise and thus much greater risk to those with no deposit home loans. The lender may also have harsh exit fees, running into thousands of dollars so read carefully before you sign on the dotted line.
Many lenders also will only lend for specific types of property, leaving well alone riskier properties in regional areas and places with no established resale value.
Here are a few tips to help you manage your financial position.
- Allow for higher interest rates when budgeting for repayments over the next 2-3 years,
- Ensure personal debts like credit cards and car loans are under control before committing to a property loan, and
- Make extra repayments where possible to reduce your exposure to higher rates and falling prices.
About The Author
Brad Slade
More information available at http://members.ozemail.com.au/~lnart/
Buying your first home will likely be the biggest and... Read More
Escrow is one of the last stages in the purchase... Read More
Mortgages are easy as long as you understand them well.... Read More
The prospect of mortgage debt elimination is something that many... Read More
If you as an investor understand the process, you will... Read More
If you have seen all the advertisements regarding refinancing your... Read More
Financing a home with bad credit is a common problem... Read More
When you're self employed you have numerous advantages. As you... Read More
To find the cheapest home improvement loan that you can,... Read More
Whether you need some extra cash to pay off some... Read More
You've heard that interest rates are down and you think... Read More
Your equity is the amount your home is worth, on... Read More
For many seniors one of their greatest sources of security... Read More
A Home equity line of credit is a loan which... Read More
There are many mortgage products available on the market today.... Read More
Being a creature of habit can cost you plenty when... Read More
Home equity loans or lines of credit have increased dramatically... Read More
The answer depends on several factors including your financial situation.... Read More
A mortgage lead is an exciting thing because you are... Read More
A jumbo mortgage is different than a conforming loan. A... Read More
This post is a must read for anyone considering purchasing... Read More
Anyone who borrows money is always looking for the cheapest... Read More
In previous decades, when a borrower missed a payment on... Read More
Current account mortgages are fairly new to the sector. They... Read More
Perhaps you're a homeowner in need of some quick cash.Maybe... Read More
The quest is on! You're in the market for a... Read More
We live in a society where people are losing their... Read More
You can maximize your savings by shopping for a lender... Read More
The information in your credit history helps mortgage lenders decide... Read More
Your home is a source of pride and accomplishment. Did... Read More
As interest rates have risen in the last six weeks... Read More
Owning your dream home need not just be a dream.... Read More
So you have been through a bankruptcy and surely have... Read More
Help is available to borrowers who have claims against their... Read More
Here are some mortgage tips that can help you obtain... Read More
This is a great time to Refinance Your Home or... Read More
Homeowner - does this term catch your attention every time... Read More
It isn't difficult to get a homeowner loan if you... Read More
From time to time, we hear a story about a... Read More
Online high risk home mortgage lenders specialize in offering loans... Read More
An offset mortgage is very similar to a current account... Read More
Mortgage would have never happened, had mortgages been a no... Read More
Reverse Mortgages are exploding in popularity and as the baby... Read More
You can buy a home with a bad credit record;... Read More
At some point as you're writing out your rent check,... Read More
If your down payment on a home is less than... Read More
If you're thinking about taking out a home improvement loan,... Read More
This is an excellent loan for those that are lacking... Read More
People with bad credit that are looking to get a... Read More
Frequent Asking Questions:What are Points? A. There are several types... Read More
Outlined below is a useful guide to flexible mortgages. Flexible... Read More
Many people choose to take out home improvement loans so... Read More
There are two broad types of home equity loans:Term loans:... Read More
There are great mortgage loans for people with poor credit,... Read More
Rising home prices, particularly on the East and West coasts... Read More
Home is the place you inhabit. It is the place... Read More
For many seniors one of their greatest sources of security... Read More
Recent news has made much of parents stretching their finances... Read More
The home equity loan has become quite popular in the... Read More
In recent years, the mortgage industry has introduced dozens of... Read More
Whether you are just moving out on your own for... Read More
Applying for a subprime mortgage loan online can seem intimidating... Read More
There are many types of mortgages, and the more you... Read More
A mortgage is a loan that is guaranteed by a... Read More
The process of obtaining a mortgage or home loan can... Read More
Outlined below are some useful flexible mortgage tips. The most... Read More
Mortgage Refinance |