Do you want to become a home owner but have little or no deposit? If so then a No Deposit Home Loan may be right for you. There are a number of lenders that now offer 'No Deposit Home Loans" and choosing the right one is very important as they do vary when it comes to interest rates and conditions. It is here is where we make understanding your options much easier.

There are 3 loan types that we will explain in this section:

• 100% Home Loans, - Also referred to as No Deposit Home Loan, which in real terms can be misleading, as often enough you will still require a small deposit to cover the cost of Lenders Mortgage Insurance (LMI) and/or other borrowing costs such as, loan application fee and settlement fee. Normally your first home buyers grant of $7000 can be used to cover most of these costs (please read below for more information about this loan type).

• 106% Home Loans - These loans, although they have a slightly higher interest rate than your standard 100% Loans, they do in some circumstances provide the applicant with the chance to get into the property market now rather than later (please read below for more information about this loan type).

• Family Pledge or Limited Guarantee Loans - These types of loans will require you to have a guarantor which can either be a family member or a friend in some circumstances.  The guarantor will need to provide a limited guarantee secured against their residential property for the amount you need to borrow over 80% of the purchased property value, including purchasing costs if needed. This will save you thousands of dollars as you won't have to pay lenders mortgage insurance (please read below for more information about this loan type).

100% Home Loans Types

No Genuine Savings 100% Loan: This type of loan is ideal for someone who can't show any savings history whatsoever and assuming that you also meet the lenders servicing criteria. Remember that if a deposit is required, this can be from any source such as a gift, inheritance, sale of an asset or the $7000 first home owners grant. The bank will lend you up to 100% of the value of your property.  (In other words if  you buy a property valued at $350,000 the lender will allow you to borrow up to $350,000).

Genuine Savings 100% Loans, If you are able to show that you have saved about 3% over 6 months  (this is dependant of the lenders criteria) then you will have a wider choice of lenders who will be willing to lend you a 100% of the property value and are often more generous with their serviceability criteria than if you have no proof of savings.

106% Home Loans

If you want to purchase a property where a 100% Loan does not meet your borrowing needs then this may be what you need. These loans will allow you to borrow up to 106% of the purchase price. Important: The maximum loan amount will vary depending of where your property is situated.

Here are some scenarios were you will use for this type of loan:

• First home buyer with zero or very little deposit that wants to own their first home now rather than waiting a year or more to build up a deposit whilst still paying rent.

• A non-first home buyer with very little deposit who wants to purchase an owner occupied property but won't receive any stamp duty exemptions nor the first home owners grant, and needs extra funds to cover purchasing costs.

• A property investor who wants to put down no deposit to purchase an investment property and who wants to maximise the negative gearing benefits.

Family Pledge or Limited Guarantee Loans

This type of loan allows you to borrow up to 100% of the purchase price, plus all other costs such as legal fees and stamp duty. It is available for the purchase of an investment or residential property.

How does this loan work? In simple terms when you take out a Family Pledge or Limited Guarantee Loan the Guarantor, which could be a family member or friend (Note: who you can use as a guarantor will depend of which lender you chose) will guarantee about 20% of the value of the property you are purchasing plus related purchasing cost if required, secured by a first mortgage over their residential property. Note: This type of product allows the guarantor to nominate a specific amount the guarantee is limited to, rather than the traditional "open" guarantee for the whole loan amount. The guarantor can request the lender to be released from the guarantee at any time. (Note: Standard credit policy in regards to LVR's do apply. The remaining LVR should not exceed 80% of the property value otherwise the borrower will be charged an LMI premium based on the current property value).  Remember: To maximise your savings you will be better off borrowing up to 80% of the value of your property to avoid having to pay Lenders Mortgage Insurance (LMI) but this doesn't have to always be the case.

Example: a customer wishing to purchase a $300,000 property and borrow $285,000, would have an LVR of 95%, which will incur LMI Premiums. But with a Family Pledge or Limited Guarantee for $60,000, this will keep your LVR down to 80% of the property value, saving you approximately $5,800 in LMI Premium.

Important: It is also important to understand that you will still be required by the lender to service the whole amount of the loan including the portion which your family or friend has guaranteed for you.  When deciding to become a "Guarantor", it is very important to always seek legal advice as they will need to understand what their responsibility will be even though it is only a limited guarantee.