With house prices continuing to rise, many young first home buyers are making their purchase with a 10% deposit just to get on to the housing ladder.
A low deposit means two things - obviously a bigger loan to service, which in turn costs more, and number two a number of additional costs. Low deposit loans (generally under 20%) often come with higher interest rates, additional admin or servicing fees, or require things like a registered home valuation (which can cost upwards of $1,000). There is also the risk of the house value falling lower than the house (which is still extremely unlikely given the current climate).
With house prices continuing to rise, we still generally recommend to buyers to use a low deposit to get a foot on the property ladder. Yes, there may be extra changes incurred, but often these are just one-off or short term charges. With house prices continuing to rise, we are finding that many low deposit borrowers quickly make up the extra equity just by their house price rising, which then in turn allows them to move off the higher low deposit rate.
This is where we can help. Since we review your mortgage regularly, we can advise when you might be close to the equity margin and we can then look at moving you on to a regular (and lower rate). While this might incur a valuation charge and/or break fees, it is likely you will be better off in the long run. Every bank has its own terms, conditions and fees, so we do the legwork to advise you on the right financial choice for your individual situation and current financial goals.
If you are a low deposit borrower and aren’t sure if you are in a position to buy, give us a call and let’s chat.