No Deposit Home Loans
Do 100% loans still exist in Australia?
Yes! However you will need help from your parents!
The days of borrowing 100% of the purchase price without any proof of savings have gone. Unfortunately due to the GFC, there are no lenders able to fund these types of loans.
However, you can still borrow 100% if you get a little creative, or if you get some help from your parents.
So how can I still borrow 100%?
You have two options that can help you to borrow 100% of the property value, effectively buying a home with no deposit.
With a guarantee from your parents:
If your parents own a property and are willing to guarantee your loan, then you can borrow 100% or more of the purchase price without proving any savings of your own.
The guarantee will be secured by your parents’ property, behind their existing mortgage. Because of this additional security, some of our lenders are willing to waive the requirement for savings.
This option is by far the most common way for first home buyers and investors to borrow the full purchase price of a property. You can learn more about this option on our guarantor mortgage page.
With a gift from your parents:
If you can reduce your loan down to 90% of the purchase price, then you can qualify for a home loan with no proven savings record. If you have been renting for 12 months, then you can borrow 95% of the purchase price without proving a savings history.
You can read more about this on our no savings page.
If you already own a property:
There are loans that allow you to use the other property you own as additional security, enabling you to borrow 100% of the purchase price of a new property.
This is a creative method of finance for people who have a small 3% to 5% deposit however do not meet standard bank criteria. In most cases, they have a problem with their credit history. This is more expensive than the other options so we only recommend this if you cannot apply for a standard loan.
What if these options do not work for me?
Unfortunately there are no lenders in Australia that currently offer a no deposit loan other than the above options. Therefore, the best way for you to get a loan now to try to save a deposit of your own.
Follow these tips to help you qualify for a mortgage:
- Prepare to buy: You can use our Prepare To Buy program to get ready to qualify for a mortgage.
- Save a 5% 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, the 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 then the lenders will lose a significant amount of money if you can’t make the repayments. For this reason they look very closely at your credit file and rental history.
- Stay in touch: Our mortgage brokers specialise in guarantor loans and 95% home loans. You can ask them a question on our mortgage forum and like us on facebook so that you have our contact details when you are ready to apply for a loan.
Will I pay a higher interest rate?
Of course we all know that every bank and non-bank lender in Australia has their own rates and fees for standard loans and they tend to be all fairly similar in price. However for no deposit finance (guarantor loans or 95% plus credit card loans) some banks are way ahead of the pack with interest rates and flexibility that is unmatched by their competitors.
In particular, going for a guarantor will save you a small fortune as you will not pay an Lenders Mortgage Insurance (LMI) premium. We are also likely to be able to negotiate an interest rate lower than those advertised by the banks.
Do I need any savings for a no deposit home loan?
No, you do not always need to have savings if you have a guarantor, however in all other situations savings are required.
First Home Buyers: As a general rule, if you are a first home buyer your First Home Owners Grant (FHOG) should cover most, if not all of the costs associated with buying a property. The main costs you will incur are stamp duty (depending on which state you are in), conveyancing fees and or LMI for short.
Second Home Buyers: Due to the costs of stamp duty and conveyancing, non-first home buyers usually need to have a minimum of 5% of the purchase price available unless they have a guarantor. A deposit sourced from a gift from your family or from selling an asset is acceptable to some banks. It is quite common for second home buyers with some savings to use the 95% plus credit card option mentioned above to cover the cost of stamp duty.
Investors: Because investors do not receive the government’s grant and do not receive stamp duty exemptions, they will need a minimum of 9% of the purchase price to be able to complete the purchase, unless they have a guarantor. This is 5% to cover the deposit and a minimum of 4% to cover the stamp duty and purchasing costs.
Construction: You can build a house without any savings using a no deposit construction loan if you are a first home buyer and have a guarantor. Due to the nature of construction, we recommend that you have a small buffer of around $5,000 just in case you go over budget.
Every lender has a different LMI premium
What is Lenders Mortgage Insurance (LMI)?: LMI is insurance that protects the lender in the event that a borrower defaults on their loan. This is a one time fee charged when you borrow over 80% of the property value and is a significant cost associated with no deposit loans / low deposit loans.
How much does LMI cost?: LMI varies depending on the lender you choose and the amount you borrow. As a general rule, LMI for loans that are less than $300,000 is very cheap whilst LMI for loans over $500,000 can become quite expensive at around 3.5% of the loan amount. Please call us on 1300 889 743 or enquire online for an LMI & interest rate quote specific for your situation.
Because you have to pay LMI, with a 95% loan you only receive around 92% to 94% of the property value to put towards the purchase even though you applied for a larger percentage of the purchase price! Some lenders allow you to capitalise the LMI premium on top of the loan up to 97% or even 100% of the purchase price. This allows you to use the full 95% that you applied for!
Can I avoid paying LMI altogether?
Yes, you can! Innovative new loans have been created in recent times that allow you to borrow 100% without paying any LMI. Your parents must be a guarantor for your loan for your LMI premium to be waived. This is not available through all lenders.
Quick start no LMI loans (withdrawn): In the past there were 100% home loans that allowed you to have waived LMI without the need for a guarantor! The lender effectively took on the risk themselves and charged a higher interest rate to compensate. The higher interest rate usually lasted for the first 3 – 4 years and worked out to be around the same cost over three years as if you had paid the LMI. The advantage of a quick start loan is that you needed less money upfront to buy your property. Due to the financial crisis this product was withdrawn by the bank that offered it.
Guarantor support: If your parents, a family member or a friend can guarantee your loan, then you may be able to borrow 110% or more of the purchase price without paying any LMI. Their property can be used by the bank as additional security for your loan in what is known as a family pledge, fast track or security support application.
Your parents may assist you by guaranteeing the loan using a 2nd mortgage on their home, behind their current loan (if they have one). The guarantee can be removed at a later date if certain lending criteria are met.
What are the benefits of a no deposit guarantor loan?
No deposit loans have become an attractive option for many people who do not have the funds to contribute toward a mortgage.
Some of the main benefits of guarantor loans include:
- No savings are needed.
- Can borrow the full purchase amount plus the money needed for stamp duty or any other associated costs.
- Lenders Mortgage Insurance (LMI) is not required!
- Both investors and owner occupier buyers can take advantage of this product.
- Some loan packages come with great features including a redraw option or the ability to make extra repayments.
Guarantors have a fixed liability and can only be pursued for the agreed guaranteed amount, making this a more secure option. The guarantee can be secured by either their property or a term deposit.
They do not have to make the scheduled loan repayments and the guarantee can be released upon request if the borrower now meets standard bank criteria and the bank agrees. Normally this is when the borrower owes less than 80% of the value of their property.
You can purchase property using the existing equity in any properties that you own, without providing a deposit. Alternatively you can use the equity in a family member’s property to help you buy a property.
This means that you can use any cash you have to continue investing, whilst receiving both returns and capital growth on any of your existing investment properties.
With extra spare cash, investors can then undertake construction work or renovations on some of their existing properties.
There are also various tax advantages associated with purchasing a investment property with no deposit, specifically with negative gearing.
To find out how we can help you with your no deposit loan, call us on 1300 889 743 or enquire online to get in touch with our mortgage brokers who specialise in no deposit home loans.
Can I borrow 100% and consolidate my debts?
Yes, you can borrow 100% and consolidate your other debts such as HECs, personal loans and credit cards provided you have a guarantor that can use their property as additional security for your loan. Currently 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 guarantee.
Who can borrow 100%?
Buying a house to live in: First home buyers and other people buying 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 someone who lives with their parents and wants to buy an investment property as their first property rather than a place to live in. In other cases investors can often reduce their loan to 95% of the property value to have a wider choice of lenders.
What are the lending criteria for a no deposit loan?
Credit requirements: Lenders apply very stringent credit guidelines when assessing no deposit home loan applications. We’ve listed the common rules used by most lenders below:
- Credit history: You must have a perfect credit history with Veda Advantage. No Australian lenders will make an exception to this policy if Lenders Mortgage Insurance approval is required.
- Repayment history: You must be paying all of your current debts such as credit cards, personal loans and rent on time.
- Location restrictions: You must be buying in a major town, capital city or regional centre. One of our lenders is willing to consider anywhere in Australia, however, most other lenders are very strict about the location that you are buying in.
- Property type: The property you are buying must be a standard type of property such as a house, townhouse, unit or vacant land. As a general rule, unusual or unique properties are not acceptable. We have been able to lend for duplexes, inner-city apartments, studios, bedsitters and even company title units in the past for customers of ours that have a good income. If you are not sure then call us and we will let you know.
- Stable employment: Your employment situation must be stable and ongoing.
- Income: Your income must be high enough that you can easily service the loan. You cannot borrow to your limit with a high LVR mortgage.
- Professionals: Professionals such as accountants, lawyers, doctors, vets, nurses, government employees and teachers are highly sought after by lenders because they are well known to be a lower risk than people in other professions. Because of this, we can sometimes get the lenders to make exceptions to their normal lending policies for people in these professions. If you aren’t in one of these professions, don’t worry! Lenders will consider anyone who is in a good financial position for a mortgage.
Is it better to save a deposit or borrow with no deposit?
That depends on the property market you are in. If you are in a market that is increasing in value, then more often than not it is far cheaper to borrow 100% using a guarantor than to wait and save a deposit. This is because the lost capital gains ends up costing you tens of thousands of dollars.
Most people find it difficult to save a deposit anyway and after 6 months, are in the same situation as they were before . For this reason, most people prefer to borrow 100% 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 are 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 is declining in value, then it may be better to save a 5% deposit and apply for a 95% loan if you would prefer not to use a guarantee. Please contact us on 1300 889 743 or enquire online and we can discuss your options with you so you can make an informed decision as to when to apply for your loan.
Do no deposit home loans have extra features?
Yes, no deposit home loans with the help of 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
Note that no deposit finance is not available with a line of credit loan.
How high will my interest rate be?
Not as high as you think! No deposit finance with the help of a guarantor is often available with competitive interest rates and even application fee waivers for some loans. We are able to obtain professional package 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 which 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% & 100% borrowers, please contact us on 1300 889 743 or enquire online to find out how we can help you.
Which lenders offer no deposit loans?
A wide variety of bank and non-bank lenders offer no deposit finance with the help of a guarantor. These lenders include ANZ, BankWest, CBA, Homeside Lending, NAB, St. George Bank, Suncorp, Westpac and many more. Our panel of lenders tend to offer special discounts from time to time so there is no “best” no deposit lender.
Are no deposit loans available Australia wide?
Most no deposit lenders have location restrictions or other postcode restrictions on no deposit loans outside of capital cities and major regional centres. If you are buying in Sydney, Brisbane, Melbourne, Adelaide, Perth, Darwin, Canberra or Hobart then you should have no problem.
Common regional areas that are accepted by all lenders for no deposit loans are Wollongong, Queanbeyan, Newcastle, Wagga Wagga, Tamworth, Coffs Harbour, the Gold Coast, Sunshine Coast, Cairns, Toowoomba, Townsville, Ipswitch, Bundaberg, Ballarat, Bendigo, Albury / Wadonga, Freemantle, and Geraldton.
What if you are outside these areas? One of our lenders will accept no deposit loans with the help of a guarantor in any location in Australia!
How do I apply for a no deposit home loan?
Do you qualify for a mortgage with no deposit & no savings?
As your specialist no deposit mortgage broker we are here to help! Contact us on 1300 889 743 or enquire online and we can then discuss your situation with you to see if no deposit finance with the help of a guarantor is suitable for you. We can help you prepare to apply for a home loan in the future if you don’t qualify for a loan at the moment.
If you are eligible then we can usually organise an approval over the phone with one of the lenders on our panel.