No Deposit Construction Loan
There are no longer any lenders in Australia offering No Deposit Loans. You can still borrow 100% with a Guarantor Construction Loan.
Build your home without any savings!
Did you know that no deposit home loans can now be used to finance construction?
Previously 100% home loans were only available for established housing, however thanks to innovative new loan types, you can now borrow to purchase and build on vacant land. Best of all the interest rates for a construction loan are usually no higher than for any other type of no deposit loan!
Do I need any savings for house and land packages?
No, most house and land packages can be financed up to 100% of the total cost of the land plus the builders costs for construction. No deposit house and land packages are a simplified option if you do not want to go through the hassle of organising a builder, house plans and council approval. Be careful as some packages are overpriced, and others offer cash backs that appear to be a discount, but are actually just marketing hype.
Are there 100% land loans?
No deposit land loans are available on the condition that you are building on the vacant land within one or two years. In some cases we can negotiate with the lender to waive the requirement to build. Land loans are very location dependant so if you not buying in a capital city or regional centre please contact us to find out if your location is accepted by the banks.
Are no deposit loans available for renovations?
Yes you can borrow 100% of the cost of the renovation or addition to an existing house. The amount you can borrow will depend of when you are renovating:
- You already own the house: If you own the house already and intend to knock down and rebuild or to carry out significant renovations then this is possible using a no deposit loan. Note that some lenders will restrict you to 95% of the value of the current house plus the cost of the renovations.
- You are buying a house: If you are buying a home and have a building contract in place to commence renovations immediately then this is looked on more favourably by the banks. In these cases borrowing 100% of the house plus the building contract price is usually possible.
Can I build houses or townhouses with no deposit?
Small developments of up to two dwellings, a duplex or two townhouses with a 100% loan is possible, however you have to be in a good financial position to qualify for the loan. In some cases it is possible to build up to three houses or townhouses with a no deposit loan. Please refer to the no deposit investment loan page for more details.
Can I borrow to pay for landscaping or other work?
Yes it is common to include the cost of other improvements such as pools, a garage, a shed, a pergola, a spa, septic tanks, water tanks and utility connections to all be included in the building loan. Note that you should obtain quotes for this work up front or should include it in your building contract price with your house builder. If you do not provide evidence of the cost then your bank may not approve the extra money for you.
Can I borrow a little extra?
It is a good idea to have a buffer or contingency in case of unexpected construction costs or a change of plans. No deposit loans will only allow you to borrow 100% of the total cost of the land and construction contract. You can only borrow over 100% of the cost if you have a guarantor that can offer their property as additional security.
We recommend that you budget a minimum of $5,000 just in case of unforseen costs.
How does the bank pay the builder?
The bank will pay the builder directly in a process known as construction drawdowns. When the builder presents you with an invoice, all that you need to do is sign a form and fax it to the bank along with the invoice. They will then deposit the money directly into the builder’s bank account.
In some cases, and almost always for the final drawdown, the bank will send a valuer to the property to complete a progress inspection. A progress inspection may delay the payment to the builder for up to one week, so we recommend that you put in your drawdown requests as soon as possible so that you do not delay the payment to your builder!
What documents will I need?
In addition to the normal documents required for a no deposit home loan, you will also need:
- Building contract / quote: If you have chosen a builder then you will need either a formal quote or the final building contract so that the bank can assess the loan. The building contract should include the drawdown schedule requested by the builder.
- Builders licence / insurance details: Your builder must have the required licences and insurances for your state. Always check that your project is covered by Home Warranty Insurance (HWI) or the equivalent for your state.
- Council approved plans: Drawings of the proposed buildings that have been approved by the council will be required so that the bank’s valuer can assess the on completion value of your property.
- Quotes for other work: Please provide quotes for any landscaping, sheds, pools or other work that will not be completed by the builder that is building the house.
What if I am an owner builder?
There is no lender that can approve 100% loans for owner builders. If you are an owener builder then we recommend that you either use a licensed builder instead or ask a relative to guarantee your loan until the house is complete. Even if you are a licensed builder and you are building your own home most banks will not approve more than 75% of the total cost of the land and construction!
How do I apply for a no deposit construction loan?
If you would like to know which lenders offer the cheapest no deposit building loans then please contact us for an obligation free quote.