Finding No Deposit Home Loans in Australia

Published: September 23, 2019

When you're buying your first home or starting a family and need a bigger place, trying to save for a 20% deposit on your home loan can be a struggle.

Some banks might only require a 10% deposit, with select Lender sometimes offering a minimum deposit of 5%. However, a 20% deposit is generally needed to avoid paying the Lender's Mortgage Insurance (LMI). Some financial institutions might offer a no deposit home loan when you meet certain conditions, for example, having a guarantor.

Take note: ComparingExpert and consultants are not mortgage brokers. The information provided in this article is to help you make an informed decision. Please contact your home loan provider or financial institution for advice and guidance.

Can you buy a house with no deposit?

There are ways you can buy a home with little to no deposit. If you're a first-time homebuyer, select Lenders might borrow you 90% to 95% of the property value. A zero-deposit home loan could be considered if you have a guarantor. A guarantor is usually an immediate family member that offers the equity in their home as security for your loan.

How much can you borrow for a home loan?

While the minimum deposit for many Lenders is usually 10%, a 20% deposit is recommended by most banks and financial institutions. Borrowing more than 80% usually poses a higher risk for the Lender and may attract additional costs like Lenders Mortgage Insurance and higher interest rates.

What is the minimum deposit for a house in Australia?

Most Lenders require you to pay a deposit between 5% and 20% of the purchase price of your property. A low deposit home loan is when your Lender requires less than the recommended 20%, for example, you can borrow up to 95%. Typically, when you borrow more than 80% of the property value, you must pay Lenders Mortgage Insurance (LMI).

What is Lenders Mortgage Insurance?

LMI protects the Lender if you are unable to make repayment; it is an upfront cost that you can generally decide to pay upfront or have it added to your home loan amount. Lenders Mortgage Insurance is usually calculated on the amount you're borrowing and the deposit you've managed to save. However, LMI's differ between financial institution lending you the money and the insurance provider they use.

5 Ways to get a home loan without a deposit

Most Lenders require proof that you saved a certain amount of money to put toward your deposit. This is called genuine savings and shows the Lender that you are responsible with your money. Below are some of the ways you can get a home loan without a deposit.

First Home Owners Grant (FHOG)

The first time home buyer might be eligible for the FHOG when meeting specific criteria, for example, if they plan on living in the house for 6 to 12 consecutive months. The grant can then help toward the payment of your deposit.

A guarantor loan

A guarantor loan is a loan where the equity from immediate family members acts as collateral. Equity is the difference between the property value and how much is still owed on the home loan for said property.
Should you be unable to make repayments, the bank then takes possession of the family member's equity. For someone to be eligible as a guarantor, they generally need to have:
  • A great credit score
  • Equity in property
  • A secure income

Monetary gift

Your parents can gift you the 5% to 20% deposit as a non-refundable gift, or you can use the money you received from an inheritance. Although not generally viewed as genuine savings, this monetary gift is usually accepted by many Lenders when you've held the money in your account for 3 to 6 months.

Equity in another property

If you already own a property and it's worth more than you owe on the home loan (positive equity) you might be able to use this existing equity as a deposit. Make sure you're financially prepared to pay two mortgages simultaneously.

A personal loan

If you can prove you have a high enough income to repay both a personal loan and home loan with your savings, and a good credit history then some institutions might allow you to use your personal loan to cover the cost of your mortgage deposit.

More tips to help you qualify for a minimum deposit mortgage

  • Show genuine saving by providing the Lender with at least three months worth of bank and savings account statement,
  • Have a stable and high enough income to prove you can afford repayments,
  • Clear any personal debts and show that all outstanding payments have been made on time,
  • Lower your credit card limits,
  • Check your credit score. Borrowers should have a high credit rating.

Dangers of a zero or minimum deposit on a house

Although a 100 percent mortgage loan may allow you to buy your dream home sooner, there are risks you need to consider, including:

  • Generally, much higher interest rates,
  • Additional fees and charges might apply,
  • Lender's Mortgage Insurance needs to be paid when borrowing more than 80% of the property purchase price,
  • Restrictions on where you can buy property in Australia,
  • Longer approval time as the application process might be more complicated.

Frequently asked questions and answers

How do you buy a house when you have a low income?

Lenders might consider giving you a home loan if you can meet specific criteria, for example:

  • Proof you can comfortably make monthly repayments,
  • Have a good credit score,
  • Use a guarantor or qualify for a first home owners grant,
  • Show suitable amount of savings for a deposit.

How to buy a second property with no deposit?

By applying for an equity loan and meeting certain criteria, you might be able to qualify to buy a second home with no deposit. You might need to show proof that you can afford to pay two mortgages at once and have an excellent credit score.

Does a guarantor need a credit check?

Yes, generally a guarantor needs to be able to prove that they are financially stable enough to help you pay your home loan. Typically, a credit check is conducted as proof of this. They might also need to meet additional credit criteria, depending on the size of your loan and your Lender.

Can you use home equity as a down payment?

Yes, generally if you have paid off more than 20% of your existing mortgage, you might be eligible for this option. However, a poor credit score could count against you.

Can you get a zero deposit home loan if you’re self-employed?

It is doubtful that you'll be able to get a 100% deposit home loan when you work for yourself. However, a Lender might consider increasing your borrowing amount if you can show that you have been self-employed for at least two years and provide them with tax returns and proof of a stable income. The Lender could also request proof of income from your previous employer to help you prove your income stability.

How much stamp duty will you need to pay?

When buying property in Australia, stamp duty tax gets imposed and varies between states and territories. The amount you'll pay is usually based on the property's market value or purchase price, whichever is greater.

First-time home buyers with a home valued up to $600,000 generally receive a discount on stamp duty in many states.

  • First Home Owners Grant by State

    Find out if the first home owners grant can help you buy your first home. Compare the grant amounts for QLD, NSW, Vic, WA, and other states in Australia.
  • What Is A Variable Home Loan Rate?

    Discover whether a variable interest rate might be the right option for you by reviewing its pros and cons. Learn more and compare its features & benefits.
  • What Is a Fixed Home Loan Rate?

    Find out if a fixed home loan meets your requirements by learning how it works and reviewing its pros and cons. Compare fixed rate home loans; 1 to 5 years.
  • Home Loans

    Discover which home loan might suit you at this stage of your life. Search for a home loan type and rate suited to your unique requirements and budget.

Thanks for reaching out!

We will review your comment and get back to you as soon as possible. If your inquiry is urgent, please use the phone number listed at the top of this page.

Talk to you soon.

Ask an Expert?