Zero deposit home loans

Being the owner of your home is not just a matter of what you would like best, but also a long-term investment. Most people have to borrow money from some sort of financial institution, such as Homestart’s low deposit home loans in order to be able to fund their dream of buying their home, but there are still many of them out there who cannot to make this step. And the main reason preventing them from actually getting a home loan is related to the fact that, in most of the cases, home loans come with quite a large down payment or deposit.

However, a newcomer to the home loan financial market has stirred the interest of many people out there: the zero deposit home loan. From afar, this would seem to be the perfect solution for those people who cannot afford making an initial deposit for their home loan. However, before you jump into anything, you should first and foremost make sure that this actually is the right choice for you.

What are Zero Deposit Home Loans?

Put very simply, zero deposit home loans are bank loans that cover for the price of a home in its entirety. That means that the buyer doesn’t have to put up a down payment before the bank approves the loan.

Also known as ‘100% home loans’ because they often cover the majority of the loan, these loans have an even younger “sibling” as well: the 106% home loan. This loan will cover not only for the price of the home, but also for the price of the additional things the buyer would normally have to support: the legal fees, the stamp duty, the mortgage insurance and so on.

What are the Advantages and Disadvantages of These Home Loans?

Like with everything in the world, zero deposit home loans come with their advantages and with their disadvantages as well. It is important that you don’t blindly rush into anything and that you get acquainted with both the pros and the cons of taking a zero deposit home loan.

The main advantage of taking this home loan is quite obvious. For those who can’t save money for the down payment, this loan can work quite well. After all, not everybody can afford to save such large amounts of money in a relatively short amount of time.

However, if you find yourself in this situation, you should make sure that you understand the fact that taking a zero deposit home loan means that you will be indebted for a larger sum of money than if you would have taken a normal home loan. This means that your repayments will most likely be higher as well.

If you can afford making a down payment, then this is probably the best option for you because this way you will be able to pay a larger part of your home’s price without any kind of interest rate. However, if you know you cannot afford doing this, then make sure you calculate exactly how much money you would have to pay every month for a zero deposit home loan, so that you know for sure that there will not be any kind of surprises further on. A zero deposit home loan can be an excellent choice if you cannot afford a deposit and the mortgage repayments will be comparable to rent.