Getting the Deed Without Deposit
Category General News
One of the most daunting aspects of buying a new home is putting down a deposit. Regardless of the value of the property, it's going to a big sum of money, and very few people have that kind of cash just "lying around". So what do you do if you've found your dream home but can't lay down a deposit? Buy it anyway! Don't believe it? Read on to see how.
According to property expert David de Waal, there are four possible options to consider; find a bargain buy, buy with a partner, postpone the purchase to save up the deposit, or finance the deposit.
But, before we get into the finer details, let's consider why banks like to see a deposit. Firstly, it demonstrates that you're fiscally disciplined and have already developed a healthy saving habit, and secondly it gives the bank collateral should you default on a payment for whatever reason. Simple enough. Onto your buying options.
Be a Bargain Hunter
They're as rare as snow on the beach, but you can find a bargain property that's been undervalued jump on it! Not only will you be getting an amazing property (hopefully), you'll be doing the bank a favour.
"In practice, if you buy a property that's priced way below its market value, the bank is more likely to grant a 100% bond because it knows that it will get its money back if it's ever forced to sell it," said David.
Two's Better than One
Maybe you have some money saved, but not enough for the full amount, in that case, partner-up! Buying with a partner allows to split all the costs and bond repayments, and might mean you can even afford a better property than you expected.
"When assessing affordability, the bank will take both partners' incomes into account, and this will increase the chances of being granted a bond," he said.
"Spouses are natural partners for property ownership, but more thought is required when you buy with friends or distant relatives. You need to consider what will happen to the property ownership if the partners fall out or one of them wants to sell due to changed circumstances."
Wait a While
It might seem pretty obvious, but not everyone considers just waiting a little bit longer and saving up some cash while you do. Unfortunately, this means you might miss out on the property you had your eye on, or have to wait considerably longer than you'd hoped, but it'll pay off (literally) in the long run.
"It'll stand you in good stead when the time comes to buy because the bank will see evidence of your ability to save consistently, and it will, therefore, be more likely to grant you a bond."
If you absolutely can't wait, don't have someone to partner with, and haven't found a bargain your final option is financing your deposit. But don't take this lightly. Short-term loans can be costly with high interest rates and not the kind of thing you want to get into if you're not 100% certain that you can make all the repayments. You also most likely won't be able to get a short-term loan from the same bank that you're approaching for a home loan, so keep that in mind.
Whichever option you decide to go with, remember to consider all of the costs associated with buying a home before you commit. They can quickly add up and catch you off-guard and financially overextended.
Author: Berman Brothers