How To Get A Home Loan with a Low or No Deposit

Is It Possible to Buy a Home with No Deposit?

Yes, it is possible to buy a home with no deposit, though this situation is relatively uncommon.

Most buyers opt for low deposit home loans, which require some amount of upfront deposit but are more widely available.

A common way to purchase a home without a deposit is through a guarantor home loan.

In this arrangement, a third party, usually a family member, uses their own property as security for your mortgage.

This can enable you to borrow the full amount needed to buy the home.

To make informed decision, Book a free consultation with Con. He is a one of the most trusted Mortgage broker in Sydney.

What is a Guarantor Home Loan?

A guarantor home loan involves a third party, typically a family member, using their own home equity to secure a loan for someone else.

With a guarantor, you might be able to borrow up to 100% of the property’s value.

The guarantor’s equity needs to cover at least 20% of the new property’s value plus costs such as stamp duty. The lender will use the guarantor’s property as security until the guarantee is no longer needed.

If the borrower fails to make repayments, the guarantor may be responsible for the loan. Therefore, having someone guarantee your loan carries significant risk.

Once the guarantee is repaid or the property’s value meets the lender’s requirements, the guarantor can be released from the loan.

While home equity loans allow homeowners to borrow against their property’s value, in guarantor loans, equity is used as security to help the borrower obtain financing

Additional Options to Buy a Property Without a Deposit

Aside from guarantor loans, you might be able to buy a home with no deposit through :

1. Equity in Another Property :

If you own another property with substantial equity, you can use this equity as security for a new home without needing a deposit.

2. Monetary Gift :

A significant monetary gift, such as from family, an inheritance, or lottery winnings, could be used towards your deposit.

Pros and Cons of Buying a Home with No Deposit

Pros :

• Allows those with existing property equity to use it as a deposit for a new home loan.
• Provides an opportunity to purchase your ideal home if it becomes available.
• You might avoid rising property prices while saving for a deposit.
• Enables buyers with low savings to enter the property market.

Cons :

• Some lenders may impose higher interest rates for high Loan to Value Ratios (LVR).
• Borrowing more means paying more interest.
• Deposits under 20% usually incur Lenders Mortgage Insurance (LMI).

If you want to know about HELOC Loans, read our complete guide on HELOC loans in Australia

Can I Get a Home Loan with a Low Deposit instead?

Yes, having a low deposit opens up more home loan options compared to having no deposit.

If your deposit is less than 20% of the property’s purchase price, many lenders may still consider your application, though you will likely face Lenders Mortgage Insurance (LMI) charges.

What is the First Home Guarantee? 

This scheme allows eligible first home buyers to purchase a property with as little as a 5% deposit and 2% for eligible single parents.

This government backed guarantee has been put in place to support eligible first home buyers enter the market at a reduced cost point, making it easier to save up to purchase a property.

It also comes with the added benefit of avoiding lenders mortgage insurance (LMI) which could save thousands off your loan amount.

For further information on how it all works please click here.

In addition to the above when used in conjunction with the First Home Buyers Assistance Scheme, first home buyers can also avoid the need to save for their stamp duty contribution.

For eligible first home buyers the NSW government offers significant stamp duty savings for purchasing your first property.

• Full exemption from transfer stamp duty for homes (new and existing) up to $800,000. ( A saving of $30,529)
• Discounted stamp duty rates for homes valued between $800,000 and $1,000,000.
• Full stamp duty exemption for vacant land valued up to $350,000.

For more information about this scheme click here. And for additional eligibility support click here.

How can Freedom Finance Group help you

With over 15 years of industry experience, our Managing Director, Con Nicolaou, has helped countless individuals buy their first homes with little or no deposit.

Con is dedicated to guiding home buyers through every step of the process, offering a detailed, step-by-step guide from start to finish. As a trusted Mortgage broker in Penrith with more than 15 years, Con is committed to help you achieve your financial goals.

He will find the loan that best suits your needs from a panel of over 40 lenders and explain all the government benefits you may be eligible for.

Con will also handle all the paperwork promptly, ensuring a smooth and stress-free settlement. Buying a home can be overwhelming, but with Con and the Freedom Finance team, we’ll make the process simple and easy.

Click here to schedule an appointment with us !!!