I Can’t Get a Mortgage – What Can I Do?
The days of the 100% mortgage seem to have gone (for now). You generally need a 5-20% deposit to be able to buy. This means that you will only be able to borrow 80-95% of the purchase price of the house you want. Going on the average New Zealand house price this means you should have around $20,000 - $75,000 in your savings account…
If you don’t have that sort of money, you can go about getting it by starting on a savings plan – you may be surprised how quickly you can save a significant amount – try diverting that extra money you worked out could go towards a house (mortgage payment, maintenance, rates and insurance etc) to a savings account – only pay your rent out of this account, and watch it grow. This is actually a really good way to find out how you cope with the costs of owning your own home, and evidence of a good savings history will make any bank happy!
If a 5-20% deposit is years away, or likely to never eventuate, or you just want a house now, there are other options available. For a start some banks do not strictly enforce the 80-95% rule, so shop around. A good mortgage broker could be your best bet in this situation.
You could also get a guarantor. This means you could get someone else to guarantee that you will be able to pay your mortgage and if you don’t, they will pay it for you. Usually parents are good places to start if you are looking for a guarantor. They don’t have to be a guarantor forever! When capital gains or improvements mean that you now own 5-20% of the current value of your house, you can get the guarantor removed (subject to your banks approval).
You could be gifted your deposit. Banks like it best if you have saved your deposit as it proves you have stable finances and will be able to make regular repayments. But, if you have no deposit they often accept a gifted deposit (money given to you with no legal right to claim back) or a co-borrowed deposit with another person, again probably a parent.
Co-buying is also an option - that is buying a house with a partner, relatives or friends. Or, if you are only planning to buy a house worth less than $280,000 (or up to $350,000 in some areas) you can check out the government scheme called Welcome Home Loans that helps people with no or small deposits buy or build their own homes.
Need more information on mortages – you need our Mortgages and Money Section.