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No Deposit Home Loans

Options For Home Loans With No Deposit:

home loans with no deposit

When it comes to buying a home, one of the major obstacles is saving up for a deposit. But the good news is that you can still secure approval for a home loan even if you have little to no deposit available.

Most lenders typically require you to pay Lenders Mortgage Insurance (LMI) if you’re borrowing more than 80% of the property’s value. To address this, we’ve detailed various ways you can attain approval for a home loan with a low or even no deposit.

105% Guarantor Loan:

  • This represents one of the most favorable zero-deposit home loan options in Australia.
  • With a guarantor home loan, typically a family member (often your parents) offers their property as collateral, enabling you to borrow without a deposit.
  • You can borrow up to 105% of the property’s purchase price.
  • Your guarantor must provide a guarantee secured against their property.
  • No personal savings are required from your end.

Qualification Criteria:

  • Your guarantor should have sufficient equity in their property to cover the guarantee.
  • Typically, guarantors, often your parents, should be employed. Some lenders do accept retired guarantors, but they are a minority.
  • The guarantor’s property must be located in Australia.

For more information, you can explore this option on our guarantor mortgage page.

Why Choose a Guarantor Home Loan?

  • For Borrowers:
    • No-deposit loans have grown in popularity, especially among individuals lacking the financial resources for a mortgage deposit.
    • These loans cover the entire purchase price, including funds for stamp duty and associated costs
    • Notably, Lenders Mortgage Insurance (LMI) is not a requirement, which translates to substantial savings.
    • Additionally, interest rates are often exceptionally competitive.
  • For Guarantors:
    • Guarantors have a fixed liability and are liable only for the guaranteed amount, providing a more secure arrangement.
    • The guarantee can be backed by either their property or a term deposit.
    • Guarantors are not obligated to make scheduled loan repayments, and the guarantee can be released upon request if, at a later date, the borrower meets standard bank criteria and obtains approval. Typically, this occurs when the borrower’s debt falls below 80% of the property’s value.

Utilize Existing Equity As A Deposit

If you are already a property owner, some lenders accept home equity as a viable deposit option.

  • If you have substantial equity in your property, it is possible to secure a loan without the need for any additional savings.
  • This can be achieved by leveraging your existing equity through the process of refinancing.
  • Some lenders may even offer a cash rebate as an incentive to refinance.
  • We can provide a complimentary property valuation; contact us at (03) 6144 9669 or inquire online to determine your eligibility.

If neither of these no-deposit home loan options suits your circumstances, consider exploring low-deposit options.

Low-Deposit Home Loan Alternatives

1. First Home Guarantee:

  • A nationwide program designed to assist first-time homebuyers in acquiring a property with a deposit as low as 5%, without the requirement for Lenders Mortgage Insurance.
  • Eligibility criteria include:
    • A minimum deposit of at least 5% (most lenders require genuine savings for this deposit).
    • Single first-home buyers with annual incomes up to $125,000 and couples earning up to $200,000 (including family members or friends living together).
    • Expanded eligibility for single parents with at least one dependent child, as well as legal guardians, such as aunts, uncles, and grandparents.
    • Intention to occupy the property as the principal place of residence (owner-occupier).
    • Australian citizenship or permanent residency.
  • You can access detailed information about this program on our First Home Guarantee page.

2. Gifted Deposit Home Loan:

  • Parents can provide a lump sum as a gift with no repayment requirement.
  • Key details include:
    • Parents offering 5% to 15% of the purchase price as a non-refundable gift.
    • Parents offering 5% to 15% of the purchase price as a non-refundable gift.
    • Approximately 60% of first-time homebuyers receive assistance from their parents.
  • Further insights can be found on our no genuine savings or gifted deposit pages.

3. Personal Loan as a Deposit:

  • Using a personal loan as a home deposit is an option, but it’s not favored by many lenders due to the need to manage repayments for both the personal loan and the home loan.
  • Requirements and considerations include:
    • A minimum deposit of 5% of the property value.
    • A high income.
    • The ability to borrow up to 95% of the purchase price plus the personal loan.
    • Existing debt not exceeding $10,000.
    • A clear credit history.
  • This option may not be suitable for everyone, and it’s advisable to explore a guarantor loan after consulting with your parents.

4. Borrowed Deposit:

  • Some lenders permit a borrowed deposit and do not mandate genuine savings. However, it may be necessary to have some personal funds available to cover expenses like stamp duty.
  • Key aspects include:
    • The ability to borrow up to 80% of the property’s purchase price.
    • Superannuation funds act as the deposit, eliminating the need for personal savings.
  • It’s essential to note that this strategy is intricate and should be initiated after seeking financial advice.

For further clarification and to determine the most suitable option for your situation, we’ve developed a no-deposit home loan calculator to guide you when purchasing a home without a deposit.

Consider Applying for a Shared-Equity Scheme

Shared-equity schemes involve equity partners who serve as both lenders and investors in a property. These partners contribute a portion of the property’s purchase price in exchange for a share in the property. In most cases, a minimum deposit of 5% of the property price is necessary.

  • Several shared-equity schemes and arrangements are available in Australia, including:
    • The nationwide Help To Buy scheme, where the government contributes 40% for new builds and 30% for existing properties.
    • State and territory-specific schemes.

These arrangements offer a pathway to homeownership with a lower initial deposit, making it an option to explore.

For additional details and eligibility, refer to our buying property in an SMSF page.

If you find yourself in a state of confusion, don’t hesitate to reach out for assistance and guidance tailored to your specific circumstances.

Pros And Cons Of No-Deposit Home Loans

No-deposit home loans come with a set of advantages and disadvantages that can vary based on individual financial situations, economic conditions, and the specific loan terms and conditions.

  • Pros:
    • Accessibility: These loans make homeownership accessible to individuals without substantial savings, broadening the pool of potential homebuyers.
    • Faster home ownership: By eliminating the need to save for a deposit, buyers can expedite the process of purchasing a home, potentially achieving homeownership sooner.
    • Investment opportunities: Some individuals use no-deposit loans to enter the property market as investors, enabling them to benefit from potential property appreciation.
    • Potential for government assistance: First-time buyers may have access to government grants or incentives that can be combined with no-deposit loans, providing additional financial support.
  • Cons:
    • Stricter eligibility requirements: Lenders typically impose stringent criteria, including a strong credit history, stable employment, and a demonstrated history of financial responsibility, making qualification more challenging.
    • Limited choices: No-deposit home loans are not offered by all lenders, which limits the choices available to potential homebuyers.
    • Higher risk of negative equity: If property values decline, borrowers may find themselves owing more on the mortgage than the property is worth, as they began with no equity in the property.
    • Potential for over-borrowing: Without a deposit requirement to cap the loan size, there is a risk of borrowing more than is financially sustainable, potentially leading to financial strain in the future.

The decision to pursue a no-deposit home loan should be carefully considered, weighing these pros and cons against one’s individual circumstances and long-term financial goals.

How To Secure Approval For A Home Loan Without A Deposit

If you are pursuing a no-deposit home loan, it’s important to understand the lending criteria that lenders typically assess when evaluating your application. Here’s what lenders commonly consider when reviewing your no-deposit home loan application:

1. Credit History:

A pristine credit history with Equifax is a fundamental requirement. Lenders in Australia are typically unwavering in this criterion, particularly if Lenders Mortgage Insurance (LMI) approval is necessary.

2. Repayment History:

Timely payment of all your existing financial obligations, including credit cards, personal loans, and rent, is crucial.

3. Location Restrictions:

The property you intend to purchase must be located in a major town, capital city, or regional center. While some lenders are more flexible in this regard, most adhere to strict location requirements.

4. Property Type:

The property you plan to buy should be a standard type, such as a house, townhouse, unit, or vacant land. Generally, unusual or unique properties are not acceptable.

5. Stable Employment:

A stable and ongoing employment situation is typically a prerequisite.

6. Income:

Your income must be sufficient to comfortably service the loan. Lenders are usually cautious about extending high Loan-to-Value Ratio (LVR) mortgages that would max out your borrowing capacity.

7. Profession:

Certain professions, including accountants, lawyers, doctors, veterinarians, nurses, government employees, and teachers, are highly sought after by lenders due to their lower risk profile. While being in one of these professions is not mandatory, it can enhance your approval prospects.

For those uncertain about their eligibility for a 100% home loan, don’t hesitate to reach out for personalized guidance. You can contact us at (03) 6144 9669 or submit an online enquiry at no cost to assess your options.

For A Home Loan Without A Deposit:

If you have a guarantor, you typically do not need any personal savings to secure a no-deposit home loan. However, in all other scenarios, you will generally be required to save 5% to 10% of the property’s purchase price. The specific deposit amount can vary depending on your situation:

  • First-Home Buyer: A 5% deposit is typically required. First-time buyers may also have the option to use the First Home Owners Grant to cover property-related costs, and they may benefit from stamp duty concessions or exemptions. In many cases, having a guarantor is the optimal choice for first-home buyers looking for loans without a deposit.
  • Second-Home Buyer: A 10% deposit is typically required. In addition to the deposit, you will need to cover costs such as stamp duty and conveyancing. Some lenders may accept gifted deposits or allow you to use equity from your first home to meet the deposit requirements.
  • Investors: A 10% deposit is generally required for property investors. Investors do not have access to government grants or stamp-duty exemptions that are typically available to first-home buyers.
  • Building a Property / Construction: When financing the construction of a property, it’s advisable to have additional savings on hand. Construction financing is provided in stages, and having extra funds can help cover potential cost overruns.

In summary, while a guarantor can eliminate the need for personal savings, most borrowers will need to save at least a 5% to 10% deposit when seeking a home loan without a deposit, depending on their specific circumstances and goals.

Faqs About No Deposit Home Loans

What If No-Deposit Home Loan Options Don’t Work For Me?

Unfortunately, the options listed above are the only ones under which lenders in Australia offer no-deposit home loans.

The best way for you to get a home loan is to save a deposit of your own.

Following these tips will help you qualify:

  • Save a 5%-10% deposit: Save 5%+ of the purchase price in a bank account in your name. Make regular contributions.
  • Don’t change jobs: When you are borrowing close to 100% of the purchase price, lenders like to see that you are stable and that you have been in your job for some time.
  • Pay your bills on time: If you don’t have much of a deposit, lenders will lose a large amount of money if you can’t make the repayments. For this reason, they look especially closely at your credit file and rental history.

Are No-Deposit Loans Available Australia-Wide?

No-deposit home loans are available in capital cities and major regional centres:

  • Sydney (Wollongong, Queanbeyan, Newcastle, Wagga Wagga, Tamworth, Coffs Harbour, Albury, Wodonga)
  • Melbourne (Ballarat, Bendigo)
  • Brisbane (Gold Coast, Sunshine Coast, Cairns, Toowoomba, Townsville, Ipswitch, Bundaberg)
  • Adelaide
  • Perth (Freemantle, Geraldton)
  • Darwin
  • Canberra
  • Hobart

Who Can Borrow 100%?

Buying a house to live in: First-home buyers and other purchasing an owner-occupied house make up the majority of people applying for 100% home loans in Australia — with the help of a guarantor.

They are looked at favourably by the banks because they tend to look after their property well and are more likely to pay their loan on time. Comparatively speaking, they are lower-risk borrowers.

Investors: Investors are eligible for no-deposit finance if they have a guarantor but they may be required to meet more stringent criteria due to the higher risk their application poses to the banks.

In some cases this requirement can be waived; for example, for someone who lives with their parents and wants to buy an investment property as their first property rather than a place to live in.

Investors who reduce their loan amount to 95% of the property value have a wider choice of lenders.

How High Will My Interest Rate Be?

We are able to obtain professional packages and basic loan discounts through several of our lenders.

Did you know that some lenders have very little appetite for high-LVR home loans? A high-LVR loan is any loan that is for more than 80% of the property value.

The secret to getting a good interest rate is to apply with a bank that is actively seeking this market segment. As mortgage brokers we know which lenders are aggressively marketing to 95% and 100% borrowers

Is It Better To Save A Deposit Or Borrow With No-Deposit?

That depends on the property market.

If you are in a market that is increasing in value, more often than not it is far cheaper to borrow 100% using a guarantor or borrow 95% and pay LMI, than to wait and save a deposit. This is because the lost capital gains from waiting to buy and paying more ends up costing you tens of thousands of dollars.

Most people find it difficult to save a deposit anyway and, after six months, are in the same situation they were in before. For this reason, most people prefer to borrow 100% rather than to save.

Don’t forget that Australia is not a single property market! For example, Brisbane may be increasing in value while Sydney and Melbourne remain steady. Talk to local real-estate agents to find out what is happening near you.

If you are in an area that is stable or declining in value, then it may be better to save a 5%-10% deposit and apply for a 95% loan if you would prefer not to use a guarantor.

Can I Borrow 100% And Consolidate My Debts?

Yes, you can borrow 100% and consolidate your other debts such as HECS/HELP, personal loans and credit cards provided you have a guarantor who is working and allows you to use their property as additional security for your loan.

There are no lenders in Australia that can lend more than 100% of the purchase price with a no-deposit loan that is not supported by a guarantor.

We can compare the options from our panel of lenders for you. With help from our experts, you’ll get approved for the amount you need at a competitive interest rate.

Do Home Loans Without A Deposit Have Extra Features?

Yes! No-deposit home loans with a guarantor are available with almost all loan features including:

  • Professional package discounts
  • Waived application, valuation and monthly fees
  • Fixed rates (1 year, 3 years, 5 years, 10 years and 15 years)
  • 100% offset accounts
  • Unlimited extra repayments (variable rate loans only)
  • Redraw facilities
  • Interest only repayments (up to 15 years)
  • Weekly, fortnightly or monthly repayments
  • Vacant land, building or construction loans

Before you undertake a comparison of different no-deposit loans you should complete a needs analysis with a mortgage broker. You should consider which features will give you the biggest benefit and which you are likely to use.

How Can I Get A Low Interest Rate?

Sometimes it seems like every bank and non-bank lender in Australia has very similar interest rates and fees. However, for 100% home loans, some banks are way ahead of the pack, with interest rates unmatched by their competitors. This is because some banks are interested in lending over 90% of the property value, whereas others aren’t.

How To Apply For A No-Deposit Home Loan

Our team of specialized bad credit mortgage brokers boasts extensive experience and is ready to assist you.

Several of our senior brokers have a background in major bank credit departments, equipping them with the knowledge and expertise needed to construct a compelling case for bad credit home loans.

Whether you have questions or need guidance, don’t hesitate to contact us:

  • Phone: Call us at (03) 6144 9669

We’re here to support you in your journey to homeownership, even if you’ve faced credit challenges in the past.

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