100% Loans and deposit in the Offset???
Mr. Ed.
I agree with the above however bear this one in mind. The serviceability model for any lender will be higher and tougher with a 100% loan. How? They inflate their living expense value (based on the Henderson Poverty Index) on these loans and raise the bar to service and qualify for the loan. Secondly, all lenders build in a repayment buffer (the assessment rate) into their calculations. On a regular loan, its between 0.75% above the standard variable rate to qualify (CBA/ Colonial Bank) and up to a grand 2% above the SVR on a 100% loan.
Why is this so? The 100% loans were tailored to graduates with no deposit but would move into employment with a strong income. Period. I deal with two lenders and one starts at an SVR of 8.45% SVR and the second starts at 9.25% SVR. Do you think you can make you sums work with these rates?
Now this is what I beleive is crucial. These loans are closely corellated with the 'Post Code' index of the lender. I am not talking the big five here (they won't easily touch a 100% loan), I am talking about mortgage originators who may not deal with GEMICO or PMI for lenders mortgage insurance. By the way, these lender's LMI will be between 1.6% and 2.5% of the loan! If the post code index does not allow a 100% lend, NO DEAL, deposit will be required, but the rates will be lower, the serviceability will be reduced AND the HPI figure, or the living expenses figure will also come down substantially. Easier to service the loan and hence a lower overall cost.
One of these lenders is looking to slowly phase out their 100% loan as the market is changing and they are seeking to reduce their 'Risk' profile. These two lenders were offering 110% loans up to 12 months ago in a rising property market. Now, these loans are finished and the 100% is currently being evaluated. If you live in Melbourne, you know about Docklands. You can go see the footy at Telstra Dome, and then rent a bed (a furnished apartment) for less than $50 a night? TRUE! Again, post code, 3000 - 3010 is being carefully reviewed. You will need to check the post code with the lender & if its out of a metro area, like Cairns, I dont expect this area will always be given red carpet treatment when looking at 100%, but I have not checked myself.
I hope this was a help because these policies above have prevented my clients to look at this option for 100% owner occupied loans. Now you have some numbers to work with and make an informed decision.
Derekuhb