Ros Morshead: Don't be scared off by low deposit

FILE

The whole home ownership property ladder "thing", and loan-to-value ratio ("LVR") low deposit restrictions imposed on banks can be daunting prospects that sometimes scare people off thinking about buying a home.

But with my usual glass half-full optimism, there are a couple of different ways to approach LVR restrictions for low-deposit borrowers.

Firstly, there is the option for low-deposit borrowers to buy land and build a home.

New residential builds are completely exempt from LVR rules as long as other usual lending criteria are met.

Secondly, even if you have a low deposit and want to buy a home, don't be scared off - you can still apply because your lender may have capacity to approve you, so long as the lender can meet its LVR obligations to the Reserve Bank for low-deposit lending.

The reality is this: If your existing bank or lender is unable to accommodate you, it may just be because they are restricted by LVR rules and are simply not allowed to lend to you.

The second reality is that mortgage wars are on, and every major home lender is currently out there vying for your business with a wide variety of home-lending packages on offer. So, bear in mind that if you're a low-deposit borrower and one lender can't accommodate you, then another may well be able to.

I recently wrote that just like choosing legal services, professional relationships and quality of products and services are equally as important.

The same goes for your lender and home loan, because they'll both be with you for a good part of your adult life - likely for decades.

When comparing lenders and packages, do also give some thought to what you think your life might look like in, say, five or 10 years. Do you think you may have a family and money might be a bit tighter, do you want to take time out to study or travel, or might you downsize or upsize your home as your family shrinks or grows?

How will your lender and your home loan repayment obligations fit around your life? Whatever your thoughts, be sure the lender and lending package you choose are flexible enough to accommodate the ebbs and flows of your inevitably changing life circumstances.

If you've found the perfect first home, or feel that it is time to buy another or upsize your home, then it can be worth approaching a lender for home loan approval so that you at least know where you stand and what you can afford.

Once you've got all the information, you can assess the pros and cons of different homes, lenders and lending packages, and then establish a plan to get where you want to go.

-Ros Morshead is a solicitor and principal of Morshead Law