It has been a while since I last posted a blog. I do miss my laptop and with a new keyboard, there is no excuse to not recommence with my blogging now. The topic of 100% borrowings for a home has recently come up again. So what is 100% finance? With cup day and the RBA dropping rates, should we then consider this?
100% finance in short is one's ability to borrow 100% of the equity that is being purchased. This was very common pre GFC. It was about this time in 2007 that lenders could lend 100% here in Australia and one lender went to 107%. Those were the days. Can we still get 100% loans? The short of it is, YES. By why would you?
Getting back to 100% loans. You would most probably find a lender who will "blend" their borrowings of a home loan with personal loans or with a credit card. This is the stop gap measure to force the borrower to "hurry up" in reducing the debts from the personal loan or from the credit card.
Have we not learn from the lessons of recent years? Yes, it is important to own your own home. Have a roof over our heads, but the question still stands, can we afford the loan? Let's say that we can, and the lender with the "blended" solution will help. The next question that you will need to ask is why could I not saved for a deposit? With a deposit, the interest rate would be much more favourable without the complexity of a higher rate with a personal loan or even with a credit card. Not forgetting the mortgage insurance that comes with the 100% lend. The savings from the mortgage insurance and the interest paid for this short term debt, might even be sufficient to purchase a small investment unit.
If we are not in a position to save, then going for this solution is not wise. Yes, some might argue that this will force saving habits, but if they are not there in the first place, what guarantees would there be in the future? We all love to live life to the fullest but are we saving for our future? Are we living within our means?
