The last major lender (St George Bank) offering No Deposit Home Loans to First Home Buyers has announced it will withdraw this loan product from the market on the 9th April 2009. This will significantly impact the ability for First Home Buyers to purchase their dream home.
Parents who can provide a “Limited Guarantee” (e.g. guarantee limited to 20% of lthe debt) may enable their children to borrow 100% of the purchase price and save their children from incurring the substantial Lenders Mortgage Insurance costs (e.g. $11,000.00 for a $350,000.00 Home Loan).
First Home Buyers who do not have a Limited Guarantee may be forced to save a minimum of 3% of the purchase price and then hold these funds in their bank accounts for a period not less than 3 months in order to meet the minimum deposit requirements of many Australian Banks / Lenders.
Many soon-to-be first home owners believe that the First Home Owners Grant (currently $14,000 or $21,000 until 30/6/2009) will form a large portion of their deposit, however, many are not aware of the other significant costs associated with purchasing a home (e.g. Lenders Mortgage Insurance, Legal Costs, Government Duties, Rates, etc) which can account for the vast majority / all of the FHOG funds. And with the Federal Government yet to advise if the FHOG will be extended beyond the 30th June 2009 deadline, many may find themselve having to save for many months / years before they can achieve their dream to own a home.
The demise of the No Deposit Home Loan comes as no surprise following the withdrawal of similar loan products by Rams (23/3/2009) and a long line of other Banks / Lenders over the last 6 months. Many Banks / Lenders have also raised their approval requirements in an attempt to protect themselves from the Financial Crisis and the forecasted Unemployment Crisis which many economists predict will soon have a significant impact on the Australian economy.
