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Saving a 20% deposit can feel like the responsible first step. But while you’re saving, the market isn’t standing still. Let's run through your options.
We have good news. There are ways to invest in property without having a full cash deposit sitting in your bank account. Here are three strategies investors use to get started sooner.
Some of the no-deposit property buying strategies available in Australia include:
A family pledge or guarantor loan allows you to buy property using a family member’s equity as additional security.
The guarantor can use their home's equity to guarantee part of their family member’s loan. This reduces the lender's risk, allowing the borrower to secure a mortgage with a lower or even no deposit. Other benefits of this type of lending include:
Over time, as the borrower builds equity, they may be able to release the guarantor from their obligation.
This strategy can fast track your entry into the market. But it also carries risk. If the borrower defaults, the guarantor is exposed. This is not a handshake arrangement. It requires clear advice and careful structuring
If you already own property, you may already have a deposit. It just doesn’t look like one.
You can read more about using equity as a deposit here.
You can potentially use your superannuation to invest in property. This is another strategy that may suit people who don’t have a cash deposit saved up.
To purchase a property in super, you need to set up a Self Managed Super Fund (SMSF). Whilst there is no legislated minimum balance required to set up a SMSF, it’s advised to compare the fees you are paying on your current super to the ongoing cost associated with operating the SMSF. The general consensus is that the minimum fund balance you would need is around $200,000.
More information on property investment and self managed super funds
The biggest myth in property investing is that you must wait until you’ve saved a full 20%.
In reality, structure matters just as much as savings.
Family pledge loans, equity and SMSF strategies can all work in the right circumstances. The key is understanding the risks, the rules and what suits your financial position.
Before you sit on the sidelines for another year, speak with a DPN Mortgage Broker and find out what’s actually possible for you.
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