No deposit home loans: Dream now, pay later-ish

What is a no deposit home loan?

A no deposit home loan is where a home buyer borrows 100% of the property price.

Usually, buyers need 20% of the property price to borrow money to buy their home. In some cases they only need as little as 10% or even 5%, if they're willing to pay lender's mortgage insurance or if they're using a government scheme.

With a 0% deposit home loan, the borrower wouldn't need any savings to put down as a deposit.

No deposit home loans aren't very common, but they are possible.

Who offers a no deposit home loan?

The most common type of no deposit home loan is a guarantor home loan.

Major banks, second-tier lenders, customer-owner banks and non-banks offer guarantor loans.

But not every lender among those will offer the same LVR. Each lender will have different criteria to determine whether or not you can borrow 100% of the loan or a lower amount.

Some lenders may also offer no deposit home loans if you've got enough equity to use as security.

How to qualify for a no deposit home loan

Each lender will have different eligibility criteria for not only whether or not you qualify for a no deposit home loan but how much you can borrow.

Lenders will look at:

• The loan amount
• The value of the property
• The value of your security / your guarantor's security
• Your ability to service the higher loan repayments.

You'll also need to meet the standard lending criteria around age and residency status.

What are the risks of a no deposit home loan?

• Higher borrowing amounts
• Higher interest rates
• Risk to existing assets
• Risk to family member's property and credit score, if using a guarantor

If you're acting as a guarantor it's advisable to seek legal advice from your own source.

How to compare no deposit home loans

• Check interest rates: The lower the interest rate, the lower your repayments will be.
• Check fees: Some loans will charge upfront and/or ongoing fees which can drive up the cost of the loan. Compare loans to see what's a reasonable fee for your loan type.
• Check conditions: For a no deposit home loan you'll need to make sure you're eligible and meet the lender's conditions.

It's also a good idea to seek professional advice from a mortgage broker. They'll know which lenders are open to lending without a deposit, whether through existing security or a guarantor.

Frequently asked questions

• Is it possible to get a home loan with no deposit?

  Yes, it is possible to get a home loan with no deposit but it's not for everyone. The most common way to get a home loan with 0% deposit is through a family guarantor.

  You may also be able to get a no deposit home loan by using other properties you own as security.

  Alternatively, there are low deposit home loans where you could borrow with as low as 2% to 10% of the property price.

• What's the difference between a low deposit and no deposit home loan?

  A low deposit home loan is where you have below 20% of the property price saved up as a deposit. Some lenders allow 10% deposits, but you can also get loans with as little as a 5% deposit. You would usually need to pay lender's mortgage insurance (LMI) in that instance, unless you're using a government scheme.

  A no deposit home loan is where you borrow 100% of the property price.

• How much can I borrow with a 0% deposit?

  The amount you can borrow with a 0% deposit depends on the value of the property being guaranteed or secured against your loan.

  For a guarantor loan this will depend on the amount of equity the guarantor has in their property. You can only use up to 50% of the equity you have in a single property as a guarantee.

Written by

Rebecca Pike

Editor, Money

Rebecca Pike is Finder’s money editor, with over 7 years of experience in mortgages and personal finance. A frequent TV and radio commentator, she frequently appears on Sunrise and 7News, Today and 9News, as well as Sky News, Channel 10 and across radio and print. Rebecca previously served as Editor of Mortgage Professional Australia. She has a Master’s degree in Journalism as well as ASIC-recognised certifications in Tier 1 Generic Knowledge and Tier 2 General Advice Deposit Products, which comply with ASIC guidelines. See full bio

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