No Deposit Home Loans – Construction to 90%

When it comes to home loans for construction there are a wider variety of 90% loans than there are pure no deposit construction home loans. With this in mind and a new product which is called the deposit gap loan you are still able to fully fund your construction.

How this works is simple, the home loan component will make up 90% of the cost and the deposit gap loan will then bridge the gap between 90% and the full funding required as this product can extend up to 5% of the purchase price. In essence you still obtain full funding for the construction whilst enjoying the benefits of a 90% home loan.

The benefits to be had with a 90% construction home loan are that you do have a broader choice of lending institutions to choose from ranging from major banks through to niche lenders, more importantly though you also have the potential to save thousands in mortgage insurance costs. The reason that mortgage insurance is less expensive with a 90% home loan is that there is equity in the home from the outset and this poses less credit risk for the lending institution.

Another benefit is that the deposit gap loan can be paid off within 3 to 5 years therefore leaving you with the 5% equity after this short time and potentially more depending on the capital growth of your home.

This option of mixing a construction home loan and a deposit gap loan is available to not only first home owners but anyone wishing to construct their own home. Again the reason for choosing the option of combining these loans to fully fund your construction is to minimise your out of pocket expenses whilst still achieving the goal of building your own home.

It should be noted that with the Credit Issues being experienced Globally, Lenders know require applicants to show 5% genuine savings for any loans that are above 85% Loan to Value. Although Lending institutions will still consider applicants under a no deposit scenario, it is of utmost importance that you can demonstrate a 5% savings pattern over a 6 month period.

For further information we recommend, prior to any purchase that you obtain a pre-approval, ensuring that the Lender of choice is comfortable in providing you with the finance to purchase your First Home.

You can contact us for more clarification.

As mentioned the 90% construction home loan also offers a broader choice of home loan provider and with this comes greater choice of the specific product type and the structure and features you want as part of your home loan package. You may have a preferred lender you wish to go through or you’d like to have a branch network for your banking needs, perhaps a fixed rate or a split of fixed and variable interest rates. By selecting a 90% construction home loan these choices are available to you.

Here are some benefits of constructing your own home which are outlined below:

To simplify the information we have condensed these policy guidelines into short points for your reference below:

	Stamp duty savings as you only pay this on the land component
	You choose the design and size of the home depending on your taste
	You choose where your home is located within the areas available to you
	Pride in the fact that this is your home and no one else but you has lived in it
	A more affordable option than purchasing in an established suburb
	Savings on mortgage insurance premiums

The funding of a construction home loan happens in stages as compared to one transfer of funds when purchasing an existing property. These stages are referred to as ‘progress payments’ and the stages generally occur as outlined below:

	Laying of the Slab
	Erection of Frame
	Completion of Roof and Exterior Walls
	Lock up Stage
	Final settlement

As there are many options available we invite you to contact us and have a chat to a home loan consultant who will able to guide you through these options and explain how the home loan and deposit gap loan work. We can also provide you with comparisons so you can compare apples with apples.

	Useful Sites as a point of reference:
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