100 percent home loans used to be very common. If you were purchasing a home for $300,000, you could often borrow the full amount, without having to save up a for a deposit. This is because many lenders operated on the understanding that house prices always go up in value, so they felt assured that the asset would grow in value, while the loan would be repaid and decrease.
Now, we know more about how property cycles work, and many lenders only offer 100% home loans with a guarantor. Learn how these types of loans work and see if you're eligible.
100 percent home loans guide
Compare mortgages that let you borrow up to 95%
Most of the loans in the table above allow guarantors to cover at least a portion of your loan. All loans in this table have a maximum LVR between 90% and 95% and some may require at least 5% deposit of genuine savings.
Borrow 100% with a guarantor
The only real way to borrow 100% these days is with a guarantor. This is usually a family member who owns their own property and can guarantee your deposit.
You borrow the money and make repayments as usual, but the guarantor is partly responsible if you can't meet your repayments. A guarantor can cover part or all of a deposit or even the loan itself.
Here are the basic things you need to know about guarantors:
- Eligibility. A guarantor should be a family member over 18 years old who has equity in their property and good credit.
- Risk. If you default on your mortgage (meaning you can't make repayments) then your guarantor might have to pay up. This could force them to sell their property in order to pay back your lender.
- Repaying the deposit. If your guarantor only agreed to guarantee a 20% deposit then once you've repaid 20% of the loan they're off the hook even if you default. This helps minimise the guarantor's risks.
- Avoid LMI. Another advantage of having a guarantor is you can avoid lenders mortgage insurance even though you haven't saved a 20% deposit yourself. This could save you thousands.
Learn more about the ins and outs of guarantor home loans
Can I borrow more than 100%?
Yes. With a guarantor some lenders will let you borrow up to 110% of a property's value.
You can also read more on no deposit borrowing in our longer guide.
Getting a deposit through cash gifts, inheritance or other alternatives
If you can't get a guarantor you could scrape a deposit together from many sources. Lenders do want you to have at least 5% of a property's value in genuine savings, but there is a way around this. You can get a deposit together in the following ways:
- Your parents could give you money as a gift or you could inherit the money.
- You could sell an asset, such as shares, to fund your deposit.
- You could use equity in another property you own.
- A first home owners grant can count as part of a deposit.
The genuine savings rule is the tricky issue with the options above (and the fact that not everyone can take advantage of gifts or assets). But if money from a gift, sale or inheritance has been sitting in your account for three to six months most lenders will accept it as genuine savings regardless.
The complete guide to saving up a deposit
Get a low deposit mortgage
Lastly, you can save a 5% deposit the old-fashioned way and look for a low deposit home loan. There are many mortgages out there which you can get with a 5% or 10% deposit.
How do you spot a low deposit home loan? Look at the maximum insured loan to value ratio (LVR), which should be 90–95%. A 90% LVR means a 10% deposit. A 95% LVR means you only need a 5% deposit. But don't forget there's lenders mortgage insurance on top.
Start comparing low deposit mortgages
Why won't banks give you a 100% home loan any more?
After the 2008 Global Financial Crisis, Australian banks tightened their lending criteria. Lending someone 100% is considered too risky.
By tightening their lending criteria, banks and lenders were better able to lend to people who could realistically afford to repay their loans.