Bad Credit Home Loans with No Money Down

By Angela Monroe - September 10, 2018

Are you in a position of really wanting to purchase a home, yet you simply don’t have the money for a down payment? Not having a deposit can be a real obstacle for many people looking to buy their dream home, when combing this with a bad credit history it makes it difficult to get access to finance. But there are options.

It’s important that you speak to us honestly and accurately about your current situation, we can advise you on whether this type of bad credit home loan could work for you.

What are the pros and cons?

Here’s a simple list of the pros and cons with a lower deposit home loan – all of which are explained more in detail below.

Pros:

  • You’ll get your dream home faster
  • You’ll get the home that you want even if you don’t have any money for a deposit

Cons:

  • Higher monthly repayments
  • Higher interest rates
  • Could require extra insurance
  • House prices could decline

Understanding bad credit home loans with no money down

Is it the right option for you?

Generally, getting a bad credit home loan with no money down suits a small group of people. It suits people who are completely certain that they will have a steady income for the foreseeable future yet do not have the money in the current situation to pay for a deposit or down payment.

In this type of situation, a bad credit home loan with no money down works well as it enables people to get a home that they may never otherwise have the chance to.

Remember that loan terms can be up to 40 years, so it really is essential that you are confident of your income stream long-term.

What are the drawbacks?

It’s really important to be aware of the drawbacks of getting a home loan without any deposit or down payment. Although it can be a tempting idea, you need to think through the disadvantages very carefully.

  • Higher interest rates: since you are offering no deposit on the loan, you are likely to be charged much higher interest rates by the lender who will view the borrowing as high risk.
  • Higher monthly repayments: overall your monthly repayments will be much higher than with other types of mortgages.
  • Additional insurance: some lenders will require you to take out extra mortgage insurance if you are borrowing over a certain percentage of the value of your home.
  • House prices: if house prices drop you could end up owing more on your home than it’s actually worth. If this happens and you decide to sell your home, you will be selling at a loss.

What should you do next?

Once you understand the pros and cons of bad credit home loans with no money down, you can get an idea of whether this is the right option for you. If you are in a situation where you are anticipating a good income stream for the future and a home that will appreciate in value, we can help you decide whether this type of loan could work for you.

We have years of experience working with people with bad credit, so we can match you with the right lenders to find the right bad credit home loan for you.

Angela Monroe
Angela Monroe is the Community Manager at The Positive Group, specialising in giving people the information that they need when they need it, and putting you on the path to a fair financial future. She has 8 years of experience in helping Australians find the right finance solutions, and regularly contributes articles to empower Australians with the knowledge they need to become financially healthy.

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