The first property you buy will most likely require a cash contribution.
This will require diligently saving over an extended period of time. Reaching a savings goal, such as a deposit for a property, no matter how modest is proof positive of your ability to exercise financial discipline and delay gratification.
Fortunately, lenders see it the same way!
If you are able to save consistently, it is reassuring to them that you will be able to do so when it comes to servicing your debt. This is especially so if your rate of saving is commensurate with the anticipated mortgage payments.
The maximum LVR (currently) is 90% including Lenders Mortgage Insurance for investment purposes or 95% including LMI for a principal place of residence.
Other sources of cash for a deposit could be an inheritance or a gift. It’s important to be aware though that gifts must be truly a gift and not expected to be paid back, otherwise it would be considered a liability and reduce borrowing capacity. The lender will require a Statutory Declaration from the benefactor to officially renounce any expectation of the money being re paid at some time in the future.
Parents can assist their children to buy by providing access to their own equity. They can guarantee a separate loan of 20% of the property’s bank assessed value plus costs, secured by equity in their own property.
The borrowers must be able to meet 100% of the repayments required. Should they default, the parents are responsible for the separate loan and must make good the outstanding amount.