KEY POINTS:
Tough new loan rules requiring homebuyers to stump up 20 per cent of the cost of a house should not stop those who are serious about getting onto the property ladder.
Although ANZ, National, ASB and Sovereign have officially limited lending to 80 per cent of a property's value, this doesn't mean first-time buyers must delay their dreams while they save the rest, says Jodi Cottle, author of Young & Singles Guide to Property Investment and director of Sable Mortgages.
"There are still a couple of mainstream lenders out there that will lend 95 per cent," says Cottle. "The key to this is that they require the 5 per cent to be genuine savings and they require the borrower to have squeaky clean credit history and stable employment."
Mark Jurgeleit, principal of Meta Mortgages, says Westpac will still consider lending above 80 per cent to "clients with proven incomes," but borrowers should expect more in-depth assessment of their ability to repay than had become the norm before the credit crunch.
Banks will lend outside their criteria based on merit.
"The vibe is definitely that good deals can still be done at higher rates," Jurgeleit says.
So if a buyer shows the bank they can comfortably service repayments on a loan of more than 80 per cent of the home's value, then there is no need to wait, Cottle says. Buyers who have a 5 or 10 per cent deposit saved still have options to cover the deposit shortfall if they are serious about buying a home and earn enough to meet payments on alternative financing arrangements.
Cottle suggests getting a personal loan for the deposit shortfall - one of her clients has a 10 per cent deposit saved, but is obtaining a personal loan for the additional 10 per cent.
Another way is to see if the vendor will leave funds in the property subject to a second mortgage to be repaid within an agreed period, a form of loan called vendor finance, which is enjoying a resurgence in the current credit conditions.
First-home buyers can ask their parents to raise the deposit shortfall against their own property. This won't cost parents anything provided the buyers can meet the mortgage repayments on their behalf.
Alternatively, Cottle suggests first home buyers secure their new purchase against their parents' property. The bank cross-secures the loan against both properties, so in this case the parents become co-liable. Jurgeleit says parents considering helping their children in this way should take independent legal advice and be confident of their children's ability to repay - or as a back-up position, that the property could be rented for enough to cover the mortgage payments.
Young people are also buying property in groups, he says. They might not pool sufficient resources to amass a 20 per cent deposit, but tying two or three people's incomes to the loan may get the deal over the line from the bank's perspective.
"It is unknown how long lenders are going to limit their lending to 80 per cent," says Cottle.
"It might be months or it might be years, but this is not reason enough to put off a purchase if you want to pick up cheap property and cheap money."
