Not ready for a sizable deposit? There are options that can make you a home owner with a low deposit payment.
Deciding on how much money to use as a deposit payment can be confusing. Fintik is here to help. The path for each buyer or investor depends on their situation and personal preferences.
FHOG First Home Owner Grant
The First Home Owner Grant is a lump sum of cash available to first home owners to help with the cost of buying a first home or vacant land to build a home on. The
Grant doesn’t have to be repaid, and its not taxable, but there are strings attached.
We all like free money, and that’s exactly what the First Home Owner Grant (FHOG) is – a lump sum of cash to help with the purchase of your first home.
The First Home Owner Grant is funded by state governments, so different amounts are available in each of state and territory. Exactly how much you will receive
depends on where you are buying. In regional Victoria, for instance, the FHOG is worth $20,000.
Can you use first home owners grant as a deposit?
Military veterans who qualify for a VA loan can purchase a home with no money down. VA loans can provide up to 100% financing for qualified military personnel and veterans.
There are also non-conforming mortgage loan programs available that allow for 80/20 set-ups, which allow borrowers to obtain a second mortgage to cover the 20% down payment.
Have less than perfect income and credit? We may have a program that fits your needs!
How much should I use for deposits options?
There are costs and benefits to any option, including those with low down payments. You should carefully consider your options and discuss your plan with a professional.
Talk to one of our loan specialists today to come up with a customized solution that best fits your needs and budget.
Cost of Deposits Options
Low or no down payment programs have two primary costs that result in a higher monthly payment:
- Higher interest rates
- Higher mortgage insurance premiums.
Mortgage insurance can be removed once sufficient equity is produced. For example, if the property shows at least 20% equity in a few years, the mortgage insurance can be refinanced away.
Benefits of Deposits Options
Though the disadvantages of low down payments seem serious, there are also advantages. Take time to weigh the two and assess which is the best for you.
The chief benefits of lower down payment include the following:
- Less money out of pocket at the time of purchase.
- Higher rate of return. Your property’s appreciation will be the same whether you put 3%, 5%, or 20% down. In fact, your rate of return actually decreases as you make a larger down payment, as discussed below.
- Opportunity cost. In some cases, the smart investor can make more money from available cash by placing it in other investments.
During the first few years of the mortgage loan, the bulk of your monthly payments go towards paying interest – which is usually tax-deductible. So you get quite a bit of your monthly payments back at the end of the year in the form of tax deductions.
Carefully consider the amount of money that you want to put down. Your lender will qualify you for a certain level based on your income; however, that amount may be different from the level that you feel comfortable paying each month. You must decide what you can afford.
Talk to your loan manager at Fintik about the best situation for you.