20% Deposit – the end for the First Time Buyer?
20% Deposit – Is this the end for the First Time Buyer?
BY: Jodi Cottle – Author/Adviser
Should the First Time Buyer (FTB) wait because they don’t have a 20% deposit? “NOT AT ALL!” says Cottle, a Mortgage Adviser & Managing Director of Sable Mortgages in Auckland.
“ Yes ANZ, National, ASB & Sovereign have limited lending to 80%, but this doesn’t mean the end or, a hell of a long wait, for first time buyer in New Zealand”.
Cottle, who is going against what is in a lot of the media at the moment stats, “There are still a couple of ‘mainstream’ lenders out there that will lend 95%. The key to this is that they require the 5%, to be genuine savings, and they require the ‘deal’ to be fairly squeaky clean; i.e. clean credit history, stable employment, if a client has that, then there is no need to wait as now really is the time to buy”.
Commenting on the required 20% deposit with the four mainstream lenders, Cottle says, “With the 20% deposit issue, if a client is in the situation where they had only saved 5% or 10% and they were now thinking that they had to delay the purchase of their new home or investment, they don’t!”
Cottle advises of some alternative options still available:
1) Borrow the
shortfall from a further mortgage on mum & dads (or friends)
property that you pay for (yes this can be done and is of no
cost to mum & dad)
2) Get a personal loan for the shortfall of the deposit
3) Secure the new purchase against mum & dads (or friends) property (again, no cost to mum & dad and no, this is not the same as option 1)
4) See if the vendor will look at leaving in the shortfall of the deposit
5) Delayed unconditional/settlement day to allow you to save for the shortfall of the deposit
“Whilst some of these options obviously depend on serviceability, they are options that shouldn’t be ruled out if you are really serious about buying a property.”Says Cottle, Author of ‘Young & Singles Guide to Property Investment’.
It is unknown how long these lenders are going to keep their lending limited to 80%; it might be years or it might be months, but this is not reason enough to delay a purchase, especially when you are still able to pick up cheap property and cheap money.