How to buy a home with no deposit

If you aren't able to save the standard 20% for your home loan deposit, a no deposit home loan with a guarantor might be an option

If you don't have a deposit for a home but still want to enter the property market you can still do so with a guarantor loan. These are loans which allow your parent or close family member to guarantee a portion of your loan using their property as security. If getting a guarantee from a family member is out of the question, the only other option is a 95% home loan, meaning you'll still need to save 5% of the property value. Keep in mind, however, that you'll still have to pay lender's mortgage insurance (LMI) in this case.

NAB Tailored Fixed Rate Home Loan - 5 Year Fixed (Owner Occupier)

NAB Tailored Fixed Rate Home Loan - 5 Year Fixed (Owner Occupier)

4 .69 % p.a.

5 year fixed rate

5 .15 % p.a.

comparison rate

No Deposit Home Loan with Guarantor

Use the NAB Choice Package Home Loan - 2 Year Fixed (Owner Occupier) and use a guarantor with your home loan to save on deposit and LMI.

  • Interest Rate of 4.69% p.a.
  • Comparison Rate of 5.15% p.a.
  • Application Fee of $600
  • Maximum LVR: 95%
  • Minimum Borrowing: $20,000
  • Maximum Borrowing: $1,000,000

Comparison of 95% max LVR home loans that allow guarantors

Rates last updated December 10th, 2016.

NAB Tailored Fixed Rate Home Loan - 3 Year Fixed (Owner Occupier)

Interest rate now 3.99%

July 12th, 2016

NAB Choice Package Home Loan - 2 Year Fixed (Owner Occupier)

Interest rate now 3.75%

July 12th, 2016

ANZ Fixed Rate Home Loan - 2 Year Fixed (Owner Occupier)

Comparative rate decreases by 0.10%

August 12th, 2016

View latest updates

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Loan purpose
Offset account
Loan type
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Interest Rate (p.a.) Comp Rate^ (p.a.) Application Fee Ongoing Fees Max LVR Monthly Payment
NAB Choice Package Home Loan - 2 Year Fixed (Owner Occupier)
Enjoy a fixed home loan with discounts on rates and other NAB products.
3.75% 4.87% $0 $395 p.a. 95% Go to site More info
Greater Bank Great Rate Discount Variable with Family Pledge Home Loan - Up to 110% LVR
Discounted rate available with family pledge loans. Family pledge loans require no LMI and no deposit. NSW, Qld and ACT only.
3.89% 3.89% $0 $0 p.a. 110% Go to site More info
NAB Base Variable Rate Home Loan - Owner Occupier (P&I)
A competitive no frills home loan with no application fees for a limited time. 250,000 Velocity Frequent Flyer point offer, conditions apply.
4.10% 4.14% $0 $0 p.a. 95% Go to site More info
NAB Tailored Fixed Rate Home Loan - 3 Year Fixed (Owner Occupier)
Flexible fixed rate home loan which will allow you to take a break from repayments if you're ahead of scheduled repayments. 250,000 Velocity Frequent Flyer point offer, conditions apply.
3.99% 5.04% $600 $8 monthly ($96 p.a.) 95% Go to site More info
IMB Essential Home Loan - LVR > 80% (Owner Occupier)
Enjoy a 100% offset account and no monthly fees.
4.31% 4.33% $0 $0 p.a. 95% Go to site More info
NAB Tailored Fixed Rate Home Loan - 2 Year Fixed (Owner Occupier)
A fixed rate home loan with the ability to lock the interest rate at the time of loan approval for up to 3 months. 250,000 Velocity Frequent Flyer point offer, conditions apply.
3.85% 5.12% $600 $8 monthly ($96 p.a.) 95% Go to site More info
ANZ Fixed Rate Home Loan - 2 Year Fixed (Owner Occupier)
Lock in your rate for 2 years with an interest only option.
3.90% 5.06% $600 $10 monthly ($120 p.a.) 95% More info
Westpac Flexi First Option Home Loan - 3 Years Introductory Special Offer (New Owner Occupier, P&I)
A limited time deal for new owner occupiers. Advertised rate includes 1.03%p.a. discount for the first two years.
3.99% 4.37% $0 $0 p.a. 95% More info
St.George Fixed Rate Advantage Package -  2 Year Fixed Rate (Owner Occupier)
A discounted package rate for owner occupiers with the ability to package a Qantas rewards earning Amplify credit card. $1,500 cash back available for refinancers, conditions apply.
3.99% 5.07% $0 $395 p.a. 95% More info
Commonwealth Bank Wealth Package Fixed Home Loan - 2 Year Fixed (Owner Occupier)
Fee free extra repayments available during the fixed term. $1,250 cash back offer for refinancers. Conditions apply.
3.99% 5.00% $0 $395 p.a. 95% More info
Beyond Bank Basic Variable Rate Loan - (Owner Occupier)
Enjoy 100% offset account with redraw facility and borrow up to 95% LVR with low monthly service fee.
4.40% 4.57% $445 $11 monthly ($132 p.a.) 95% More info
ING  DIRECT Orange Advantage Loan - $150,000+ (LVR > 90% Owner Occupier)
A fully featured home loan with an offset account and discounts available.
4.65% 4.86% $0 $199 p.a. 95% More info
Commonwealth Bank Standard Variable Home Loan - Owner Occupier
Standard variable home loan with a low doc option for self-employed borrowers.
5.22% 5.37% $600 $8 monthly ($96 p.a.) 80% More info
Credit Union SA Variable Rate Home Loan - $20k and above (Owner Occupier)
A variable home loan that allows you to borrow from $20,000.
5.19% 5.25% $600 $0 p.a. 80% More info
Suncorp Bank Standard Variable Rate Home Loan  - (Owner Occupier)
Enjoy a competitive interest rate, make fee free extra repayments and a redraw facility.
5.40% 5.56% $990 $10 monthly ($120 p.a.) 95% More info
ANZ Breakfree Home Loan Package  - $250,000 up to $499,999 (LVR >80% Owner Occupier)
Pay no application fee with 100% offset account with redraw facility and borrow up to 95% LVR.
4.50% 4.60% $0 $395 p.a. 95% More info
Bank of Melbourne Basic Home Loan - Regular Rate (Owner Occupiers, P&I)
Ideal for first home owners or anyone who wants a no-frills, basic variable rate home loan.
4.64% 4.69% $500 $0 p.a. 95% More info
St.George Basic Home Loan - Promotional Rate (Owner Occupier, P&I)
A no frills loan with a competitive rate and a maximum LVR of 95%.
4.08% 4.09% $0 $0 p.a. 95% More info
Westpac Rocket Repay Home Loan - Principal and Interest
The Westpac Rocket Repay Home Loan lets borrowers to own their home sooner with a 100% offset to save on interest.
5.29% 5.43% $600 $8 monthly ($96 p.a.) 95% More info

Comparison of no deposit home loans

The loans below have guarantor options that may allow you to borrow with no deposit.

Home loansInterest rateComparison rate
NAB Choice Package 2 Year Fixed3.75% p.a.4.87% p.a.
Heritage Bank Advantage Package $700,000+3.79% p.a.4.16% p.a.
Greater Bank Great Rate Discount Variable with Family Pledge3.89% p.a.3.89% p.a.

How big a deposit do you usually need?

The deposit that is required on most home loans is usually around 20% of the value of the property. While this figure may vary between providers this is the most common amount required for the deposit, and to avoid Lender's Mortgage Insurance (LMI). If you're willing to pay LMI you can borrow as much as 95% of the value of the property, meaning you'll only need to save 5% for a deposit. Keep in mind that borrowing more than 80% of a property's value can come with higher interest rates in some cases.

What is a no deposit home loan?

Industry Experts: Former Aussie General Manager of Marketing and Products Stuart Tucker, Kim Wight and Neil Manual define and share some insights around Low and No Deposit Home loans.

Video transcript

Stuart Tucker : Low-deposit loans can be difficult. If there's zero deposit, there's really very little option, unless there's some kind of cross-equity or maybe a guarantee from a family member using cross-collateralisation of another asset.

Kim Wight : A family guarantee is where your parents will give a limited guarantee, usually 20% of the purchase price of the property plus costs, plus stamp duty.

Neil Manuel : No-deposit home loans nowadays are generally fairly difficult to obtain. Once the GFC hit, there were a lot of changes with regards to lending policies and so on, and 100% home loans were looked at as a fairly high-risk type lend. In saying that, we do offer 95% home loans. They're not difficult to obtain. They're just like obtaining any other loan. All that's required from you is to have 5%.

Stuart Tucker : Five percent deposit, there's definitely loans in the market from a lot of lenders in that area, but the main thing is, can you afford the loan?

Neil Manuel : Take the time, make the effort, and save yourself up a 5% deposit. That proves to us and that shows us that you do have the ability to save money, which also shows us that you will have the ability to pay off your mortgage.

Stuart Tucker : We would recommend everyone to build up at least a 10% deposit. If you can't get to that stage, then there's plenty of lenders that will look at you for 5%, but zero deposit loans, they're not good for anybody.

- END

Saving a deposit for your home can be a significant hurdle, especially for first home buyers or young people who are renting and trying to get into the property market. A no deposit home loan will eliminate the need for a deposit and will allow you to borrow the entire property value. These are only possible with a guarantor. A guarantor is a family member who uses their own home as security for your loan.

How does a guarantor no deposit home loan work?What-is-a-no-deposit-home-loan

In most cases a no deposit home loan is the same as a regular home loan, with the only difference being that you've sought a guarantee from a parent or family member to borrow 100% of the property value. This means that you can compare most types of loans, including those with fixed or variable rates. Other features offered include extra repayment options, offset accounts, redraw facilities and more. The way the guarantee works is also simple. Let's use an example to show how it would work.

Dan wants to buy a property worth $500,000, and has a very small deposit. His parents agree to become guarantors for his loan, and guarantee 20% of the property purchase, which is $100,000. Dan uses his own small deposit to pay for the other upfront costs associated with purchasing the property, while his parent's guarantee serves as the deposit. Dan works hard paying off his loan, and in five years, has paid $100,000 from his loan. At this point, he applies with his lender to remove his parents as guarantors from his loan, and they're no longer responsible for him in the event he defaults on his loan. Because he didn't have to pay LMI either, Dan also saved as much as $15,000 if he had saved up a deposit of 5%.

Important: You'll noticed we touched on the fact that Dan's parents are responsible for the portion of his loan they guarantee. This means if Dan failed to make his repayments and ultimately defaulted on his loan, his parents would be liable for $100,000. If you're thinking of getting a guarantor loan, or of being a guarantor, make sure you know the risks and get your own financial and legal advice first.
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Who can be a guarantor?

Lenders mostly restrict this to be a borrower's parents or other immediate family members, but some lenders can accept guarantees from grandparents, siblings, uncles, aunties and more. Each lender will have their own policy regarding guarantors, so it's best to call to find out what that is, or use a mortgage broker who has a good knowledge of these loans.

How to compare no deposit home loans

Choosing a no deposit home loan is similar to choosing a standard home loan since the features are the same. If you get it wrong you could be paying more than you should for years, if you get it right you could be paying off your loan faster and own your home sooner.

  • Flexibility. Consider your financial situation and determine whether it will be stable in the short or long term. It’s important that your home loan can change according to your future financial needs. Features such as a redraw facility and unpenalised extra repayments can give you more flexibility.
  • Guarantor flexibility. All lenders will have different terms and conditions concerning who, what, where and how your guarantor is going to fund your loan. Make sure you read all the fine print to match your personal and financial situation with your guarantor.
  • Features. Don't forget about comparing home loans based on their features. Know which features you'll use, and if there are any fees attached to them. For example, some loans might offer offset accounts but will charge monthly fees.
  • Ongoing fees and comparison rate. Most loans have fees and charges on a monthly and annual basis. When comparing loans make sure you compare the true cost, not just the cost on the advertisement. The comparison rate is the true cost of the loan. It includes both the interest rates and the fees associated with the loan. It takes into account the amount, loan term and repayment frequency but excludes government charges.

About how to calculate your typical loan fees

Pros and cons of no deposit home loans

Pros

  • Accessibility. For many borrowers, a no deposit home loan is an attractive option for those who do not have the funds to contribute towards a mortgage or a deposit amount. This provides greater accessibility of the property market.
  • Minimum required savings. Generally no savings are needed to qualify for a no deposit home loan given that you satisfy all other criteria as stipulated by the lender. In many cases, you can borrow the full purchase amount plus the money needed for the upfront costs of buying property.
  • Cost savings. With a no deposit home loan, you can save on the cost of lender's mortgage insurance (LMI) as the guarantor will allow you to borrow with a high loan-to-value ratio (LVR) above 80%.
  • Suitability. A no-deposit home loan is suitable for many types of borrowers including investors and owner-occupiers.

Cons

  • Approval process. When you apply for a no deposit home loan, the approval process can be lengthy and more difficult compared to that of a traditional mortgage application. This is because the lender will need to evaluate the security and financial situation of your guarantor.
  • Restrictive. Some Australian lenders impose restrictions on no deposit or guarantor home loans and this type of mortgage may not be available for self-employed borrowers.

Learn more about applying for a home loan with a guarantor

Some other types of no deposit home loans

While finding a guarantor is the most common strategy used by borrowers who can't raise a deposit, there are a few other ways to fund a home loan deposit.

Personal loan as deposit

It is possible, albeit uncommon, to use a personal loan as a deposit for a home loan. Most lenders require genuine savings, which means they will want to see evidence that your deposit comes from a pattern of saving. Some lenders, however, offer home loans without genuine savings. If you have a high enough income to afford two loan repayments and have good credit history, you may be able to get a personal loan to cover the cost of a home loan deposit.

Be aware, though, that most traditional mortgage lenders require genuine savings, and many personal loan lenders will not fund a loan for the purpose of a home loan deposit. While it is possible to find lenders to fit both these scenarios, you may find yourself paying higher interest rates as a result.

Monetary gift or windfall

If you've received a large monetary gift or have come into some money as a result of a windfall, you may be able to use this money as a home loan deposit. While most lenders require genuine savings, some are willing to offer home loans without a genuine savings history and will accept deposit funds as a result of a gift or monetary windfall. However, this may limit the number of lenders open to you as an option as most traditional lenders require genuine savings history.

Self-managed super funds

Self-managed super funds, or SMSFs, can be used to fund property purchases. However, SMSF property purchases can only be for investment purposes, not for owner-occupied properties. For a full discussion of SMSF property investment, read our guide.

Equity

If you already own a property, you can use the equity in your property as a deposit for another property. Equity is the difference between the amount your property is worth and the amount you owe on your home loan. Most lenders will let you use up to 80% of the equity in your property as a deposit, and some will allow you to use up to 95% if you pay lenders mortgage insurance (LMI).

Frequently Asked Questions

What if none of these options work for me?

Unfortunately there are no lenders in Australia that currently offer no deposit home loans without a guarantor. There are a few ways to help improve your chances of obtaining a home loan such as saving for a 5% deposit and improving your credit history.

Do I need any proof of savings for a no deposit home loan?

No you don’t always need proof of savings if you have a guarantor but if you’re in any other situation it is recommended that you have around 5% to cover the upfront costs such as stamp duty, LMI and application fees.

How is LMI calculated?

Every insurer/lender has a different way of calculating their LMI premium. As a general rule, you can expect a loan of $500,000 to be around 3.5% of the loan amount, which is $17,500.

Can I avoid LMI?

Yes, your parents must be a guarantor for your loan but please note that this may not be available through all lenders.

HSBC Home Value Loan - Resident Owner Occupier only

Enjoy the low variable rate with $0 ongoing fee and borrow up to 90% LVR.

ME Bank Basic Home Loan - LVR <=80% Owner Occupier

A low variable rate loan with no application or ongoing fees.

NAB Choice Package Home Loan - 3 Year Fixed (Owner Occupier)

Receive discounts on interest rates with the Choice Package. 250,000 Velocity Frequent Flyer point offer, conditions apply.

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10 Responses to How to buy a home with no deposit

  1. Default Gravatar
    Brian | August 16, 2016

    I want to get loan of ksh.10000 to start my small business.How can you help me? and where can i borrow this money from?
    please kindly help me.
    Thank you.

    • Staff
      Elizabeth | August 16, 2016

      Hi Brian,

      You’ve come through to finder.com.au, an Australian financial comparison service, and unfortunately the lenders we have available for comparison can only consider you for a loan if you are currently residing in Australia. You may need to find a lender in Kenya to start your small business.

      Sorry I couldn’t be of more assistance,

      Elizabeth

  2. Default Gravatar
    Andrew | June 9, 2016

    I have over 20% deposit but don’t have the savings history to back it up. We satisfied all other criteria but that one and was subsequently denied.

    Any help would be appreciated

    • Staff
      Marc | June 14, 2016

      Hi Andrew,
      thanks for the question.

      Some lenders will require evidence of genuine savings. The definition of genuine savings can vary depending on the lender, but for many lenders they will want to see evidence of your deposit being in a borrower’s accounts for at least 3 months.

      Some lenders may not require this evidence, but may charge a higher interest rate. A good mortgage broker will be able to advise which lender is best for these types of situations.

      I hope this helps,
      Marc.

  3. Default Gravatar
    Zade | March 10, 2016

    I want to buy a house and have no deposit, but heard and read about it saying I need 5% still

    • Staff
      Belinda | March 10, 2016

      Hi Zade,

      Thanks for reaching out.

      Most lenders require you to come up with at least a 5% deposit in order to qualify for a home loan. However, you may want to consider applying for a guarantor home loan if you’re unable to complete the required deposit. A family pledge home loan can increase your borrowing capacity and allow you to avoid paying lender’s mortgage insurance (LMI).

      If in doubt, speak to a mortgage broker to explore your borrowing options and to understand your borrowing power.

      Thanks,
      Belinda

  4. Default Gravatar
    Thabani | May 17, 2015

    I am looking for a 0% deposit,professional home loan if possible.It would be for a joint account,both parties are registered nurses

    • Staff
      Belinda | May 28, 2015

      Hi Thabani,

      Thanks for your enquiry.

      In most cases, a no deposit home loan is similar to a regular home loan, however you’ll need to find a guarantor to borrow 100% of the property value.

      A list of lenders that offer a maximum LVR of 95% can be found above on this page.

      Please note that due to tighter lending restrictions, 100% home loans are only possible if you use a guarantor.

      Thanks,
      Belinda

    • Default Gravatar
      Leeanne | December 3, 2015

      We are looking at a property value 384,000 we have no savings or deposit but have a parent guarantor with 40,000 equity is this possible

    • Staff
      Marc | December 3, 2015

      Hi Leeanne,
      thanks for the question.

      This is possible with some lenders, but as each has their own unique lending policies surrounding guarantors, I would recommend approaching lenders who you’re interested in and then speaking with them directly regarding if they would lend to you. You might also want to consult a mortgage broker, who can recommend specific loans and lenders for your situation.

      I hope this helps,
      Marc.

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