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Yes, it is completely possible to buy a home with no deposit, if you meet certain criteria.
No deposit home loans are less common, but they are possible. Lenders consider no deposit home loans on a case-by-case basis and you must meet the conditions of the loan to be considered.
There are a variety of ways to purchase a home without a deposit. The most common methods include a guarantor loan and home equity loan.
There are also a variety of low deposit home loan options available where you are able to get a home loan with less than the usual required 20% deposit.
There are a variety of ways you can purchase a home without a deposit:
By having a friend or family member use some of their home equity to secure your loan you can potentially borrow up to 100% of the property's value, without the need to pay Lender's Mortgage Insurance.
If you already own a property and have built up existing equity you can use a home equity loan to help you purchase your next property without the need to save a deposit. This can be a great option for expanding your property portfolio.
This grant, which varies from state to state, can be used to fund your purchase and put towards your deposit contribution. In most states the grant is only available to newly built properties and first home buyers or people who have not owned a property for over 10 years.
You can receive a substantial amount of money from a third party (eg. gift from a family member or inheritance) and this can be used as a deposit for your property. You may still need to provide some evidence to lenders of genuine savings and have a solid financial record.
Some lenders will offer home loans to borrowers will less than a 20% deposit -sometimes with as little as 5-10% deposit. Lender's Mortgage Insurance (LMI) is then charged due to the increased risk of the loan.
Certain professionals can get access to the Australian Government's First Home Guarantee (FHBG) where the government acts as a guarantor for your loan, allowing you to enter the market with a low deposits & without having to pay LMI.
Like with all things in life, there are positive and negatives to buying a home with little or no deposit. You need to assess these pros and cons before purchasing to ensure you get the right loan for yourself and don’t take on unnecessary risk or expense.
The positive is obvious, being about to purchase a home with a small or no deposit means you don’t have to save as much money, invest as much of your own capital and it often means you can get into the market sooner. It stops the market from rising out of reach in the years it might take you to save the full 20% deposit.
On the downside, your loan amount will be higher. This means you may owe almost as much as the property is worth and should you ever decide to sell in the short term you may find you won’t be able to pay off the total balance from the proceeds. Additionally lenders will often charges LMI for loans with a deposit of less than 20% to cover any risks associated with the loan.
Also, the approval process can also be lengthier and more complicated. Lenders don’t want to give everyone easy access to large loans so there are requirements you’ll need to meet to ensure you can afford the loan you’ll be getting and the lender’s risks are covered. Trying to get a no deposit loan yourself will be tricky – an experienced mortgage broker like myself can help you navigate no deposit home loans to ensure you’re getting the best deal possible.
If you have a third party, usually a family member, willing to use their own home equity as security this can be one of the easiest and simplest ways of getting a home loan without a deposit.
It’s very common for parents or family members to help people get into the property market with guarantor loans and in some cases you can not only borrow the full cost of the property, but even closing costs also.
The biggest risk for guarantor loans is if the property has to be sold and the full amount of the loan isn’t able to be recovered from the sale, then the guarantor’s home may be at risk.
But assuming you can afford the repayments and everyone understand the risks involved this can be a good option to consider.
It’s possible to purchase a house in NSW without a deposit, but it’s far more common to buy a home with a low deposit.
The most common ways to purchase a home with no deposit is with either a guarantor loan or using a home equity loan from an existing property.
For guarantor loans a third party, usually a family member, uses equity in their existing property as a guarantee for your agreement with the bank. Using guarantor loans I’ve helped many of my clients successfully secure home loans with little or no deposit.
A guarantor loan involves a third party. This must be a person who already owns property and is most commonly a family member, like a parent or sibling.
Security against this second property is accepted in lieu of a deposit, so the equity in the guarantor’s home must cover at least 20% of the new home’s value.
Even with a guarantor loan, you will still need to provide the bank with evidence that you have a stable job, solid credit history, and the ability to pay back the loan on your own.
Yes, if you meet certain criteria. Both guarantors and home buyers must show evidence of stable income, and solid credit history.
Even with the option to borrow 100% of the home loan, it’s still recommended to save a small deposit if you can. This can mean less paperwork, and lower interest rates.
The most obvious disadvantage is that you must rely on a third party, which requires significant trust on both sides.
The biggest risk for guarantor loans is if the property has to be sold and the full amount of the loan isn’t able to be recovered from the sale, then the guarantor’s home may be at risk.
It’s generally recommended that you still provide a small deposit, as – even with a guarantor– the approval process for no-deposit home loans can be lengthy and tedious, requiring a lot of supporting documentation.
The First Home Buyers Scheme is a New South Wales government program created to make it easier for people to access the property market.
Depending on the cost of the home you purchase, you may be either completely exempt from paying, or eligible for significant discounts on stamp duty.
There are multiple schemes to assist first home buyers in NSW. Depending on where you live and the value of the property you hope to buy, you may be entitled to some or all of the following:
First Home Buyers Scheme: This scheme offers concessions or exemptions on stamp duty. For new and existing homes valued up to $800,000, buyers may receive full exemptions. Concessions are also available for homes valued between $800,000 and $1,000,000.
First Home Owner Grant: A grant ranging from $10,000 to $30,000 depending on where you live, usually only available to those building new houses or buying brand new properties.
Home Guarantee Scheme: As part of this scheme, home buyers can purchase a property with a deposit as low as 5%, while the government guarantees the remaining. This removes the need for LMI, which can save thousands.
There are a few ways that first home buyers can avoid paying stamp duty. In many cases, first home owners are exempt from paying some or all of stamp duty under the First Home Buyers Scheme. There are specific price caps to consider:
To be eligible, you must move into the home within 12 months of the settlement date. Or, in the case of newly constructed homes, you must move in within 12 months from the completion date. You must then live in the home for at least 12 months.
The Home Guarantee Scheme allows eligible buyers to purchase a home with a deposit as low as 5%, without having to pay for LMI. Normally, if you borrow more than 80% of the property’s value, lenders require LMI.
However, as part of this scheme, the government, guarantees part of the loan, reducing the lender’s risk and removing the need for LMI.
Some lenders may waive LMI for specific professions. These are jobs that are considered lower risk due to higher earning potential or job stability. The exact professions vary from lender to lender, but in general the most common occupations that qualify are:
As part of the First Home Guarantee, first home buyers with deposits as low as 5% rely on the government to guarantee the remaining 15%. If no guarantor is available to you, this may be a beneficial way to buy a house with almost no deposit.
The Guarantee is available to owner-occupiers earning up to $125,000 for individuals, or $200,000 for joint applicants. You must be over 18, and an Australian citizen or permanent resident.
Similar to the First Home Guarantee, the Regional Home Guarantee allows you to buy a home with a deposit of just 5%, while the government guarantees the remaining 15%. However, this scheme is exclusively for those looking to buy in regional areas.
You must be a first home buyer, or not have owned a home in the last five years. You must also be an Australian citizen or permanent resident, and be purchasing a newly built home, not an existing one.
The Family Guarantee allows single parents to purchase a home with a low deposit. Buyers provide a 2% deposit, with the government guaranteeing the remaining 18%. To be eligible for the Family Guarantee scheme, you must be legally divorced, have at least one dependant child and not currently own a home, although you can have owned a home in the past. The government website provides a tool to determine if you’re eligible.
Many major lenders, like Westpac, Commbank and Bank Australia support the Family Guarantee. You can find a full list of participating lenders online. Alternatively, an experienced mortgage broker can help you navigate your eligibility and the application process.
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We throughly assess your financial situation, including your income, expenses, credit history, and long-term goals
We compare interest rates, loan terms, fees, and other factors to find a deal that aligns with your needs.
We finalise all the paperwork and coordinate with other parties, such as lenders and conveyancers, to ensure your loan is approved.
Your mortgage journey doesn’t end at settlement. As it evolves, our experts remain by your side.
If you need help with your deposit or want to see if you quality for a no or low deposit home loan get in touch with us today by giving us a call or booking a free consultation.