100% Home Loans - thumbs up or down?

[ladybird11]

And please expand on that for me too please .

DH has previously used the FHOG, therefore we don't have access to that. I feel like I'm chasing my tail trying to save, but within the last week I've been much tighter with my extra cash and have put it into savings. So yay me!

I'm wondering what, if any, advantages there would be to taking out a 100% home loan, just for the sake of getting into the market before prices go sky high. Apparently research conducted states that in the area we'd like to live will have a median price range of $900K in ten years time . Currently the house price range we'd be looking at is in the low $400K's.

[Arimeh]

Personally from what I have seen - don't do it. Usually places that offer the 100% (and there isn't many left anymore since the financial crisis) their interest rate is a fair bit higher than the others, plus they usually have a fee structure in place so you can't pay out the loan early and refinance with a cheaper place for like 3 years or something.

I don't believe about the prices rising that much either, because its not sustainable - our children just will not be able to afford their own places, and I doubt the government will ever let that happen. Thats my opinion on it anyway. Something will happen in the next few years to help drive prices down to where they should be. People will stop buying because they can't afford it, and drive prices down that way I would imagine. Anyway, I'm no property developer or real estate agent so its purely my opinion.

But in answer to your question, I would stay away from the 100% loans - and keep on saving.

[misty]

You won't find a 100% home loan anywhere nowdays. There are 95% home loans out there, but you usually have to be an existing customer and you want to have a fantastic credit rating, and the other 5% will generally have to be genuine savings. If you are really lucky, they may even capitalise lenders mortgage on top of that for you, otherwise that is another large cost that your will have to fund out of pocket.

Personally, so long as you can finance the repayments, I think there is nothing wrong with 95% homeloan. The key is making sure you can and will afford the repayments. Our PPOR was a 97% (95% + LMI capitalised), and we are hoping to get the same for our Investment property - just waiting on the bank to give us the OK.

[skybie]

majority of banks wont do 100% home loans any more, look into it though u might find one that will (but take close note of the interest rate that goes along with it), but in all honesty a 100% homeloan on 400k is going to be around the $600+ a week mark.
It is tough but try save as much as you can for a deposit, you'll be better off for it
Keep in mind too, that interest rates can and will go up, so leave urself breathing room to go up with them, you dont want to borrow to breaking point because u can afford it now and then struggle when interest rates go up. our mortgage has gone up hugely in the 12 months we've had it

[Reyna]

Nope, you definitely will not find a 100% home loan. NAB will do 95% (but won't capitalise Lenders Mortgage Insurance beyond that). A couple of the other 'big 4' banks will do 95% +LMI capped up to max 97% (only for existing customers, under certain conditions). Good luck, I know it's tough finding a house deposit - especially when you're down to finding those last few thousand. (it's a bit like when you're trying to lose those pesky last few kilos! lol)

[LimeSlice]

STAY AWAY!!! lol

They come with a lot of conditions - like massive amounts of mortgage insurance (which isn't for you BTW you pay for the bank to have insurance against you), is very hard to refinance them and at the end, if you cannot afford to save the deposit you will have trouble paying a mortgage when interest rates go up. 100% home loans are a huge reason we ended up with the GFC in the first place.

Take a look at the repayments for a 400k loan - at the moment, ours would be just shy of $3000 a month - if you can't save the difference between that and your rent EVERY month and put it aside for savings for a deposit, you will not be able to afford the mortgage when interest rates go up again, iykwim.

Honestly, we have a shared equity, so we only pay 60% of the mortgage, and it is debilitating. We are about to refinance to buy the whole house, and at current interest rates, a 400k loan which is about what the house is worth, will cost the above to pay off every month. I wouldn't do it again if they paid me, nor would I buy a house with less than a 15% deposit.


ETA: RAMS etc will do a 98% home loan still, if you have a high enough income.

[ladybird11]

Ok, I've forgotten about the 100% home loan thing.

Am I stupid for thinking about buying an investment property as a single application? With the intention of renting it out. I say single application so I could make use of the FHOG, thats all. Just a unit under $200K.

[MantaRay]

Also keep in mind that if you borrow all or most of the cost of the house and you need to sell (or want to sell), you will owe more than the value of the house unless the value of the house has gone up a lot. This can put you in a very difficult position. I would seriously recommend against it.

[MantaRay]

Hun, you can only use the FHOG if you are going to live in the property. And I could be wrong but I think you're not allowed to use if your spouse has used it before even if it's only in your name.

[Arimeh]

Actually MR - leesa can still claim the FHOG, but her husband can't, so the stamp duty they pay will be proportional to that.

HTH.

[ladybird11]

Just cruising about on a real estate website there is a one bedroom unit that has a current tennant till 2013, and after that there is an option for a 5 yr extension (to Uni SA). Would that be a wise step? Its $190K.....Hmmmm!

You ladies are so so so helpful - keep it rollin

[LimeSlice]

Can't claim the FHOG if your spouse has already claimed it - that is why I can't claim it Despite the fact we weren't married when he claimed it.


ETA: The LAND is what increases in value, an apartment will NOT make you money for the most part, and will cost you money, depreciates in value and as an investment is not worth it.
You want the crappest house on the best street, with the largest land size for an investment.

[Arimeh]

Can't claim the FHOG if your spouse has already claimed it - that is why I can't claim it Despite the fact we weren't married when he claimed it.

Definitely a state thing then, because you can in Queensland because I did heaps of applications on behalf of clients.

Check with the revenue office in your state leesa to see if they are the same as queensland.

[LimeSlice]

You used to be able to....It was changed righ tbefore we bought the house a few years ago (In WA anyway).
Too many people buying houses in their KIDS names etc.

[skybie]

in victoria its the same, u cant get the FHOG if ur partner has already made use of it sadly.
The only thing u can do is speak with a few banks.
dont forget if u have an investment the amount of rent u get paid may not cover the mortgage cost, so u'l have to make up the difference plus pay for your own living arrangements

[Arimeh]

Wow, seems like queensland is more generous with their money!!!

Maybe everyone should move there

hahahahaah

[ladybird11]

Doh, you're right, in SA, because DH has had the FHOG previously I can't get it - even as a single application.

Sheesh, they talk about child support being made 'fairer' for the second marriage families, where is the fairness in this scheme for second marriages?

[Jennifer13]

The FHOG is only available if you're living in the place (and there are requirements on intention, length of time, I think). In NSW we can't claim FHOG if your spouse (married or de facto) has already. I thought the FHOG was a national thing? First Home Owners Scheme provides more info on the grant in each state. I checked the site and even if your spouse will not own the home, you are not eligible to claim the grant if they are going to live there with you (in Qld too).

You may be eligible for the grant if …
You are:

at least 18 years of age
not a company or a person acting as a trustee
an Australian citizen or a permanent resident (or a joint applicant with someone who is an Australian citizen or permanent resident)
buying or building a home worth less than $1M (from 1 January 2010 to 30 March 2010)
buying or building a home worth less than $750,000 (on or after 31 March 2010).
You may be eligible for the grant if you are a trustee of a trust (other than a discretionary or unit trust) and all the beneficiaries are individuals under a legal disability who will live in the home as their principal place of residence.

You and your spouse have:

never been paid the first home owner grant
before 1 July 2000, not owned residential property in Australia
from 1 July 2000, not lived in residential property (in Australia) you have owned.

You will:

move into the home within one year of the property being registered in your name
live in the home for 6 months continuously as your principal place of residence.

The SA info is here RevenueSA.

It's worth mentioning too that you can open FH savers a/cs with banks atm and the govt will contribute a certain amount based on how much you save per year. So if you have no deposit, even 12 mths of savings will see you end up with more $$ than just what you can put in. The FHSA also benefit from reduced rates on interest earned.