No-Deposit Home Loans

Buying a home with no deposit increases your loan-to-value ratio (LVR) — what you’re borrowing relative to the property's value — and may result in a higher interest rate compared to a standard loan with a deposit. Lender’s mortgage insurance (LMI) may also apply in some scenarios.

A no-deposit home loan or zero-deposit home loan allows you to buy a property without an upfront deposit, meaning you can finance the entire property value without using your own money. These are also known as 100% home loans and typically come with higher interest rates and stricter borrowing requirements than traditional mortgages.

Lenders generally won’t approve a no-deposit home loan unless you have a guarantor (someone willing to use their equity to secure the loan) or sufficient equity of your own (the value of your home minus your outstanding mortgage balance). Additionally, you’ll still need to show evidence of genuine savings and have a solid financial record.

Without a guarantor or equity, most lenders require at least a 5% deposit – or put another way, an LVR of at least 95%. You may have to pay LMI to mitigate the lender's risk if your deposit is less than 20%, unless you apply through a government support scheme like the Home Guarantee Scheme (HGS).

A guarantor home loan is a common no-deposit home loan option for first-home buyers. It works like a standard home loan — but it’s partly secured by your guarantor’s home equity instead of your cash deposit.

Some lenders allow you to borrow up to 100% of the property's value with a guarantor. You might also be able to include additional costs, like conveyancing fees, effectively borrowing more than 100%. However, it’s usually the case that the guarantor will only cover a portion of your loan amount, usually enough to reduce your LVR to 80% so you can avoid LMI.

A guarantor is typically a parent or immediate family member who owns their own home and has a high level of equity, because they have paid off a large chunk of their mortgage, their property has increased in value, or both.

Your guarantor isn’t required to contribute any money towards the home loan, but will be partially responsible for the debt in the event of a default. You, as the borrower, are contracted to make repayments as scheduled. Your property could be sold to recoup the lender’s costs if you default.

This doesn’t apply to first-time home buyers, but if you already own a property with enough equity, you can use it as security to buy another home without needing a deposit. Equity is the value of your home minus your outstanding mortgage balance.

You can access your home equity by refinancing your current mortgage. This is done by increasing your existing home loan balance, known as a top-up or with a cash-out refinance (where your equity is paid as a lump sum).

Some lenders may even offer you a cashback rebate if you switch to them when you refinance. The lender will first conduct a property appraisal to determine exactly how much usable equity you have. You need at least 20% equity in your home to refinance and avoid paying LMI on a new loan.

The Home Guarantee Scheme (HGS) is an Australian government initiative that supports eligible homebuyers to buy a property with a deposit of as little as 2-5%. Housing Australia guarantees the rest to avoid needing to pay for LMI.

There are a few different programs available to homebuyers through the HGS, including:

Most states and territories offer a First Home Owner Grant (FHOG) — a one-off, tax-free grant that eligible first-home buyers can use towards their deposit for purchasing a new home. Here are the first-home buyer grants in each state:

Your FHOG can be used as part of your deposit, but it can’t be the only source. You’ll need to contribute some of your own funds towards a deposit. Most lenders require proof of genuine savings (money you've saved over time). This shows you can manage money well and might be a reliable borrower.

The FHOG is typically paid directly to your lender at settlement and applied to your home loan. If you're building a home, the grant is usually paid when the first payment on your construction loan is due.

Under the FHSS scheme, first-home buyers can withdraw up to $50,000 of voluntary super contributions for a home deposit. A single person can make super contributions of up to $30,000 per financial year at a tax rate of 15% instead of their marginal income tax rate.

Saving for your first home within your super fund allows you to benefit from tax savings and any investment returns it generates. This means you might not need to save a deposit outside of your super fund.

The FHSS applies to voluntary superannuation contributions only, not to mandatory super guarantee (SG) employer payments. Before signing a contract for your first home, you generally need to apply for and receive a FHSS determination from the Australian Taxation Office (ATO). After signing the contract, you then apply for release with your super fund.

Expected to commence sometime in late 2024, the Help to Buy scheme is a new national shared equity scheme that will allow low-to-middle-income earners to buy a property with a deposit of as little as 2%, with the government contributing 30-40% equity towards the purchase.

Income thresholds apply. To be eligible, single homebuyers must earn less than $90,000 annually and couples less than $120,000 per year. The Help to Buy legislation is currently before the Senate.

Colloquially known as the ‘bank of mum and dad’, a loan or gift from parents or family can go towards a deposit for your home. Lenders are likely to ask for evidence of where the money came from and may require a gift letter signed by your benefactor(s) stating the funds were given to you as a gift with no strings attached.

While most lenders will accept monetary gifts towards a deposit, they will still want to see a history of genuine savings and proof that you can repay a home loan. They will generally ask for three to six months of bank statements and proof of a good rental history.