No Deposit Home Loans
The days of borrowing 100% of the purchase price without any proof of savings are gone. Unfortunately, due to the global financial crisis (GFC), lenders no longer offer no deposit home loans.
However, you can still get approved for a 100% home loan, subject to suitability, if you get a little creative or if you have help from your parents!
Option 1: 105% guarantor loan
- You can borrow 105% of the purchase price
- You don’t need any savings
- Your parents must provide a guarantee, secured on their property
This is the best way to buy a property with no deposit!
You can learn more about this option on our guarantor mortgage page.
Option 2: A gift
- Approximately 60% of first home buyers receive help from their parents
- Can your parents gift you 5% to 15% of the purchase price?
- Some lenders can consider your loan even if you didn’t save the deposit yourself
You can read more about this option on our no genuine savings page.
Option 3: Personal loan as a deposit
- Do you have a small 3% to 5% deposit?
- Do you have a very high income?
- You can borrow up to 95% of the purchase price plus a personal loan.
- You cannot have more than $10,000 in existing debt.
- You must have a clear credit history.
This isn’t suitable for all people. We recommend that you talk to your parents about a guarantor loan before you consider this option.
Some lenders will allow a borrowed deposit and do not require genuine savings but you may need some funds of your own to cover stamp duty and other expenses.
You can read more on our personal loan as a home deposit page.
Option 4: Equity in another property
Option 5: Use your superannuation
- Do you have over $150,000 in superannuation?
- You can set up a self-managed superannuation fund (SMSF) to buy a property
- The property must be for investment purposes, not to occupy.
- You can borrow up to 80% of the purchase price.
With this method, you do not need to have any savings yourself because your superannuation will act as a deposit.
This is a complex strategy that requires financial advice before you begin.
Discover if you’re eligible on our buying property in a SMSF page.
Guarantor loans just work!
As you can see, there are several ways to buy a home with no deposit.
However, when we assess someone’s situation, time and time again we get the best results with just one of these no deposit solutions.
Buying a property with your parents guaranteeing your loan just works!
The other options have strict approval criteria which most people cannot meet.
On top of that, the policy changes pretty regularly and, in most cases, you need to be in a strong financial position to qualify.
It’s only if your parents don’t own a property in Australia that you should consider other options.
There are other reasons to choose a guarantor option:
No deposit loans have become an attractive option for many people who do not have the funds to contribute towards a mortgage.
Some of the main benefits of guarantor loans include:
- No savings are needed.
- You 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.
- In many cases the interest rates are exceptionally low.
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, at a later date, the borrower meets standard bank criteria and the bank agrees.
Normally, this is when the borrower owes less than 80% of the value of their property.
What if these options don't work for me?
Unfortunately there are no lenders in Australia that offer no deposit home loans other than the above options.
The best way for you to get a 100% home loan is to save a deposit of your own.
Following these tips will help you to qualify:
- Prepare to buy: Use our prepare to buy program to prepare 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 and 95% home loans. You can ask them a question on our mortgage forum or like us on Facebook so you can get in touch with us when you are ready to apply for a loan.
How can I get a low interest rate?
Sometimes it seems that every bank and non-bank lender in Australia have very similar interest rates and fees.
However, for no deposit finance, some banks are way ahead of the pack, with interest rates unmatched by their competitors. This is because some banks are interested in lending over 90% of the property value, whereas others aren’t.
In particular, going for a guarantor will save you a small fortune as you will not pay an LMI premium.
Our brokers are also likely to be able to negotiate an interest rate lower than those advertised by the banks!
What are the lending criteria for a no deposit loan?
Lenders apply very stringent credit guidelines when assessing no deposit home loan applications.
- Credit history: You must have a perfect credit history with Veda Advantage. No Australian lenders will make an exception to this policy if LMI 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 but most lenders are very strict about the location that you are buying in.
- Property type: You must be buying 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. You don’t need to be a professional to get approved but it helps!
Not sure whether you will be approved for a 100% home loan?
Call us on 1300 889 743 or enquire online today to find out!
Do I need any savings for a no deposit home loan?
In all other situations, you would need savings to get approval for a home loan but there are ways around this if you have a guarantor!
- 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.
- 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 for 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 grant or 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. That amounts to 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.
Are no deposit loans available Australia-wide?
Most no deposit lenders have location restrictions or other postcode restrictions on 100% home 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!
Can I borrow 100% and consolidate my debts?
Yes, you can borrow 100% and consolidate your other debts such as HECs/HELP, 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.
We can compare the options from our panel of lenders for you. With help from our experts you’ll get approved for the amount you need at a competitive interest rate.
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, for someone who lives with their parents and wants to buy an investment property as their first property rather than a place to live in.
Investors can often reduce their loan to 95% of the property value to have a wider choice of lenders.
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 or borrow 95% and pay LMI 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.
You can use our calculator to decide if you should buy now or save a larger deposit.
Don’t forget that Australia is not a single property market! For example, Brisbane may be increasing in value while Sydney and Melbourne remain 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. You can even use inheritance as a deposit for this.
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 a 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. You have the option to switch loan types at a later date when the guarantee has been removed.
Before you undertake a comparison of different no deposit loans you should complete a needs analysis with a mortgage broker. You should consider which features will give you the biggest benefit and which you are likely to use.
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 at 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% and 100% borrowers.
Please contact us on 1300 889 743 or enquire online to find out how we can help you.
How can I get a low interest rate?
Sometimes it seems that every bank and non-bank lender in Australia has very similar interest rates and fees.
However, for 100% home loans, some banks are way ahead of the pack, with interest rates unmatched by their competitors. This is because some banks are interested in lending over 90% of the property value, whereas others aren’t.
In particular, going for a guarantor will save you a small fortune as you will not pay an LMI premium.
Our brokers are also likely able to negotiate an interest rate lower than that advertised by the banks!
Every lender has a different LMI premium
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.
LMI rates vary depending on the lender you choose and the amount you borrow.As a general rule, LMI for loans that are less than $300,000 are very cheap while LMI for loans over $500,000 can become quite expensive, at roughly 4% of the loan amount.
Because you are required to pay LMI, you only receive 92% to 94% of the property value to put towards the purchase if you were to apply for a 95% loan. That’s in spit of the fact that you actually 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!
Please call us on 1300 889 743 or enquire online for an LMI interest rate quote specific to your situation.
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 to 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 global financial crisis (GFC), 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.
No LMI loans: If you can come up with a small deposit then it may be possible to borrow up to 90% of the property value with no LMI. This will depend on your profession and the overall risk of your application.
Your parents may assist you by guaranteeing the loan using a 2nd mortgage on their home, behind their current home loan. The guarantee can be removed at a later date if certain lending criteria are met.
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:
- Homeside Lending
- St. George Bank
Our panel of lenders tend to offer special discounts from time to time so the “best” no deposit lender changes each month.
Are there any drawbacks to no deposit home loans?
You should consider whether a no deposit solution is really in your best interests.
This is particularly true if you already have the savings you need or you’re in a good financial position and can save a deposit in a relatively short amount of time.
Although we have strong negotiation power, consider the following:
- You have to meet stricter criteria than if you were to have a deposit or at least a larger deposit.
- Some lenders may charge a higher interest rate, although this isn’t true with all lenders.
- As an investment strategy, a no deposit home loan is really only suited to sophisticated investors. When building your investment portfolio, applying for too many no deposit home loans may affect your mortgage exposure limit with a given bank in the medium to long term.
- Since you’re borrowing a larger loan amount, your regular mortgage repayments will also be higher.
- You’re not always exempt from all bank fees and may still need some money put aside to cover application fees, lender fees, legal fees and valuation fees
How do I apply for a no deposit home loan?
Do you qualify for a mortgage with no deposit and 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 also help you to prepare to apply for a home loan in the future if you don’t qualify for a loan at the moment.
If you’re eligible then we can usually organise an approval over the phone with one of the lenders on our panel.
Still have questions? Feel free to comment below and we’ll get back to you as soon as possible.