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

Banks won't give you a normal home loan with no deposit. You could save up a 5% deposit, but if this isn't feasible you may still get into the property market with a guarantor loan. It's not an option for every borrower. You need to have a family member who owns their own home and can use it as security to cover your deposit. Read on to learn more about no deposit mortgages and start comparing loans.

Comparison of 90-95% max LVR home loans that allow guarantors

Rates last updated August 18th, 2018
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Loan purpose
Offset account
Loan type
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Name Product Interest Rate (p.a.) Comp Rate^ (p.a.) Application Fee Ongoing Fees Max LVR Monthly Payment Short Description
3.74%
3.74%
$0
$0 p.a.
110%
Pay no deposit or LMI and get a discounted rate with this family pledge loan. Requires a family member to act as guarantor. NSW, Qld and ACT only.
3.49%
3.52%
$500
$0 p.a.
95%
This mortgage combines a very sharp interest rate with a 100% offset account and it's available with a 5% deposit.
3.59%
3.99%
$600
$395 p.a.
95%
Get interest rate discounts and waived fees on this package loan with a 100% offset account.
3.94%
3.99%
$600
$0 p.a.
95%
A low deposit mortgage for aspiring home owners. Fees are low and you can make extra repayments.
4.08%
4.09%
$0
$0 p.a.
95%
Special Owner Occupier Rate. Free Offset Account.
4.64%
4.69%
$600
$0 p.a.
95%
New customers can score a discounted rate and access to a redraw facility.
4.48%
4.70%
$595
$0 p.a.
95%
Discount off the standard variable rate and no application fee.
4.33%
4.34%
$0
$0 p.a.
95%
A special investment rate and an offset account.
3.94%
4.85%
$595
$0 p.a.
95%
Split you home loan for free with one of the lowest fixed home loan rates.
3.75%
4.92%
$0
$395 p.a.
95%
This 2 year fixed ANZ Breakfree Package rate comes with package discount and product bundle. Terms and conditions, package fee and fees, charges & eligibility criteria apply.
3.99%
4.93%
$0
$0 p.a.
95%
A low deposit investor mortgage with a discounted, competitive rate from one of the big 4 banks.
3.99%
4.00%
$0
$0 p.a.
95%
Commonwealth Bank are currently waiving the $600 establishment fee for customers who take out this home loan.
3.98%
4.30%
$0
$299 p.a.
95%
Borrow more than $1 million and enjoy a 100% offset account and rate discount.
3.99%
4.92%
$0
$395 p.a.
95%
Borrow up to 95% LVR (subject to approval) and fix your interest repayments for the next 3 years.
3.99%
4.90%
$0
$395 p.a.
95%
Pay no application fee and fix your interest for 3 years with this ANZ package home loan.
3.89%
4.94%
$0
$395 p.a.
95%
Fix your rate for 2 years and know your repayments giving you ease in budgeting.
3.89%
4.88%
$0
$395 p.a.
95%
Low deposit package loan with a range of discounts. Earn up to 500,000 Velocity Points to spend on flights, hotels and more.
4.19%
4.20%
$0
$0 p.a.
95%
Borrow up to 95% LVR and pay no application fee if your loan is over $150K for a limited time.
3.95%
5.43%
$0
$395 p.a.
95%
Fund your property portfolio with a low deposit package loan from ANZ. Bundle your loan with credit card and bank account for discounts.
3.99%
4.85%
$0
$395 p.a.
95%
Competitive fixed rate package loan. For a limited time you can earn Velocity Points to spend on hotels and flights.
4.24%
4.27%
$0
$0 p.a.
95%
Buy a home with just a 5% deposit and get flexible repayment options and a redraw facility.
4.09%
4.46%
$0
$350 p.a.
95%
4.10%
5.54%
$600
$10 monthly ($120 p.a.)
95%
Borrow up to 95% LVR and enjoy a 100% offset account with a low ongoing fee.
4.19%
5.46%
$0
$395 p.a.
95%
A package investment loan with a competitive, discounted interest rate and 0 application fees.
4.19%
5.37%
$0
$395 p.a.
95%
4.45%
4.85%
$0
$395 p.a.
95%
Pay no application fee with 100% offset account with redraw facility and borrow up to 95% LVR.
4.89%
4.90%
$0
$0 p.a.
95%
Borrow up to 95% LVR and pay no application fee if your loan is over $150K for a limited time.
4.39%
4.77%
$0
$395 p.a.
95%
A package home loan with 100% offset account.

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What is a no deposit home loan?

Guarantor loans 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 5% deposit home loan, meaning you'll need to save 5% of the property value and your lender will lend you the remaining 95%. Keep in mind, however, that you'll still have to pay lenders mortgage insurance (LMI) in this case.

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?

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's no deposit home loan

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.

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, aunts 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.

  • 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.

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

What if you can't find a guarantor for your home loan? There are still ways to get a no deposit, no guarantor home loan, but they can be significantly trickier.

Personal loan as deposit

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).

Questions you've had

  • What if none of these options work for me? There are no lenders in Australia that currently offer true no deposit home loans. You'll either need a guarantor or at least a 5% deposit. Check out our guide for advice on how to save a deposit.
  • 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. Genworth has an LMI estimation calculator on its site which can give you a good idea of what you can expect to pay.
  • Can I avoid LMI? If you have a guarantor who can bring your total loan-to-value ration to 80% or below, you won't have to pay LMI. Please note that guarantor loans may not be available through all lenders.

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10 Responses

  1. Default Gravatar
    BrianAugust 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.

    • finder Customer Care
      ElizabethAugust 16, 2016Staff

      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
    AndrewJune 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

    • finder Customer Care
      MarcJune 14, 2016Staff

      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
    ZadeMarch 10, 2016

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

    • finder Customer Care
      BelindaMarch 10, 2016Staff

      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
    ThabaniMay 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

    • finder Customer Care
      BelindaMay 28, 2015Staff

      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
      LeeanneDecember 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

    • finder Customer Care
      MarcDecember 3, 2015Staff

      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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