Having your own home in this era is a dream that everyone loves to achieve. However, living in a rented house is not the same feeling as living in your own house. You pay so much money every month for someone else’s place and still feel like a homeless person. Many people think it is essential to have a massive deposit to buy a new home. But now, a lot of schemes for low deposit new homes have been designed. They allow you to deposit only 5% or 10% of the total amount.
How does it work?
It works like a loan but with a higher interest rate. You require a personal guarantee before buying the house. Then, after paying 10% or 15% of the amount of the property, you can shift into the place.
You have to pay the remaining 90% or 85% of the property monthly under a specific period. This period can be of 20 or 30 years, depending on the worth of the property.
Equity Loan Scheme:
Different loan schemes help you to buy your own house with a low deposit. The equity loan scheme is one of them, and it varies in other countries. These schemes primarily work under Government orders.
However, if you only have a deposit of 5%, then the Government helps you by paying 20% of the cost of your new home. However, the remaining 75% is provided by a mortgage lender. During the first five years, the equity loan is interest-free, and you don’t need to give any repayments during that time.
For applying for such loans or schemes, you need to stand on their requirements. It is because everyone cannot be eligible for these schemes. That means you should have a stable income, a good credit rating and bills paid on time.
The eligibility criteria will be according to your requirements, like how much loan you need. So, for example, if you are applying for a small loan, the eligibility requirements will be different from a big loan.
These low deposit home loans do require a guarantor. A guarantor is someone who provides his property as security. That means if you are unable to pay the loan amount, then the lender can take your guarantor’s property.
Having a good and big guarantee provides a great impression on the lender. The guarantor can be someone from your family or friend. However, you can also offer your property as a guarantee to buy a new property.
How to save for a deposit?
Some people find it hard to save money. But if you seriously want to purchase a home, do as much as you can to save money for the deposit. However, by following few steps, you can save enough money for the deposit.
- Try to cut unnecessary spending that you barely need in your daily life. For example, don’t spend money on luxury items. After all, you are saving for something big.
- Once you decide to save particular money, then don’t touch it. Instead, try to keep it in a saving pot or better to have a saving account in a bank. It will help you not to use the savings anymore.
- Try to use price comparison websites. These websites will help you save a lot of money in utility bills, insurance and weekly food shops.
- You can also invest your savings in a Lifetime ISA. These Lifetime ISA will help you to boost your savings in a short time.
If you think buying a new house with a shallow deposit is not possible, then you are wrong. You can buy your dream house with a 5% or 10% deposit amount.
You can consider different loan schemes for low deposit new homes. Try to have a better and impressive guarantee to make a good impact on the lender. Paying for your own house is far better than giving rent for someone else place. Hope this article will help you in buying a new home in a low deposit.