Can you buy a home without a deposit?

Saving for a deposit is widely regarded as the first step in any home buying journey. It can also be one of the most challenging.

According to the latest Proptrack figures (as at October 2024), it can take an average-income household around 5.6 years to save a 20% deposit for a median-priced home. That varies between states and is almost a year longer in New South Wales.

But not having sufficient funds for a traditional 20% deposit doesn’t necessarily mean you’re locked out of the housing market. There are ways you might be able to qualify for a home loan with a small or non-existent deposit.

Is it possible to buy a house with no deposit?

You can buy a house without a deposit, but it likely won’t be easy. Many traditional lenders don’t offer no-deposit home loans (unless a borrower has a guarantor) due to the risks involved. Some lenders may provide home loans without a deposit, but these are typically hard to secure and come with strict eligibility criteria and significantly higher interest rates.

Much more common than no-deposit home loans are low-deposit home loans. These are typically loans offered to borrowers with loan-to-value ratios (LVR) as high as 95%, meaning you’ll need to come up with a 5% deposit. It’s highly likely you’ll need to pay lenders mortgage insurance (LMI) for this type of home loan but in some cases the extra cost can be worth it to secure a property, particularly in a fast-rising market.

Another option is to source a lender that specialises in low deposit loans, sometimes lending to those with as little as a 2% deposit. However, you’ll generally have to show that you have enough funds to cover the other costs of buying a house such as stamp duty, fees, government charges, and conveyancing.

Our upfront and ongoing cost calculator could give you an idea of what costs you’ll be up for on top of your deposit.

Are you eligible for a no-deposit home loan?

To minimise risks, lenders impose tight restrictions for borrowers applying for a 100% LVR home loan. These may include:

• A near-perfect to perfect credit score

• A well-maintained repayment history

• Stable source of income, which may require continuous employment for at least three years

• Minimum salary thresholds

• Be buying a standard property type (house, townhouse, unit, or vacant land) in a major town, capital city, or regional centre

How can you get a home loan without a deposit?

Even if you don't have a sufficient deposit, there're several ways you can still secure a home loan. Here are some of your options:

1. Using a guarantor for your loan

As mentioned above, one way of getting a no-deposit home loan is to use a guarantor.

A home loan guarantor is generally an immediate family member, often a parent or a sibling, who agrees to take responsibility for the home loan if the borrower fails to make their repayments. Guarantors may be asked to offer equity from their properties as security for the home loan.

Some lenders offer guarantor loans of up to 105% of the property’s value, with the extra to cover for additional expenses such as stamp duty and application fees.

2. Take advantage of government schemes

First-time home buyers can take advantage of state government incentives to help cover the cost of a deposit. The First Home Owners Grant (FHOG) is a one-off cash grant offered to eligible first home buyers who are either purchasing an existing property or constructing a new house. Eligibility rules and the amounts offered differ between states and territories.

The federal government also offers the Home Guarantee Scheme where it essentially acts as a guarantor for eligible buyers taking out low deposit home loans through approved lenders without the need to take out LMI. The scheme covers three guarantees:

• The First Home Buyer Guarantee (FHBG)
  Requires a 5% deposit

• The Regional First Home Buyer Guarantee (RFHBG)
  Requires a 5% deposit

• The Family Home Guarantee (FHG)
  Requires a 2% deposit

The federal government also offers the First Home Super Saver Scheme (FHSS) which allows first home buyers to withdraw some of their extra super contributions to use as a deposit.

3. Access equity on your property

If you already have an existing mortgage, you can release equity built up in your home over the years and use it as a deposit for a second property. This strategy is often used by investors.

4. Receive a financial gift

Some lenders accept deposits made up of financial gifts given to borrowers, either from parents or close relatives. However, other lenders will only accept a deposit partly or wholly made up of genuine savings, meaning you must have saved it yourself over time.

This is often because a lender prefers to see a borrower has a track record of being able to put money aside regularly, placing them in better stead to make regular home loan repayments.

Some lenders may even require a legal document stating that the gifted deposit is indeed a gift and doesn't need to be paid back at a later date. This is because any ‘unofficial’ debt the borrower has may substantially reduce their capacity to service a home loan.

How to get a 100% LVR home loan in Australia

There are 100% LVR home loans written in Australia, but applying for one doesn't necessarily mean you won't have to put some cash on the table, or provide an asset to secure the loan against. Some lenders simply don’t deal in 100% LVR mortgages, while others may consider them on a case-by-case basis. Your best bet might be to talk to a broker or find a specialist lender offering no and low-deposit home loans.

Are you eligible for a low deposit home loan?

If you don’t tick the lofty boxes for a no-deposit home loan, some lenders will extend a home loan to people with deposits as low as 2% as long as you meet their eligibility criteria.

One such lender, Sucasa, offers a 98% LVR home loan that doesn’t demand a borrower pays for LMI, although it expects its customers to be able to cover the upfront costs that go with purchasing a home, such as stamp duty and other government charges, loan fees, and conveyancing. Generally, Sucasa requires borrowers to have 5% of a property’s value to be eligible for a loan, although only 2% of that needs to go towards the deposit.

“For our customers, ‘waiting to save a larger deposit’ is something they’ve tried or been doing for a number of years and they’re watching home ownership slip further away with growing house prices,” a Sucasa spokesperson told Your Mortgage.

To qualify for a mortgage with Sucasa, you’ll need to show you’re eligible and would otherwise have to pay LMI with another lender. The property you’re intending to purchase must also meet certain criteria – it must be new or established property of at least 50 square metres located in a capital city. These are typical requirements of many specialist lenders.

Lenders specialising in low-deposit loans will each have their own eligibility criteria, and many will charge LMI. It might be worth engaging the services of a mortgage broker to help you find the lender that will best meet your individual needs and circumstances.

Such home loans can help young people without access to the so-called Bank of Mum and Dad get into the market and other would-be borrowers who have reliable, ongoing incomes but are struggling to save a deposit as rents and home values continue to rise.

“Our borrowers range from single parents, teachers, high income households with multiple children, young professionals, new migrants, and first and non-first home buyers,” Sucasa’s spokesperson said.

“Getting a loan not only allows them to become homeowners but also enjoy the financial benefits that come from owning residential real estate and no longer needing to rent and save at the same time.”

Guarantor home loans: The ins and outs

We’ve touched on another option to secure a home loan, the Bank of Mum and Dad, who can still play a role even if no cash changes hands.

In the current home loan market, the most common example of a no-deposit loan is a guarantor loan: when a third party uses their own home equity or property as security for typically 20% of more of the home’s value. This effectively allows the borrower to take out a loan without a deposit and also avoid LMI.

The downside, of course, is that there are considerable risks for the guarantor. They're essentially along for the ride in your home ownership journey, for better or worse. If you’re unable to meet repayments for the home loan they've guaranteed, they’ll have to pay them. If that’s not possible, the lender will first sell your home and then turn to the guarantor to cover any shortfall. That may force them to sell their home too.

However, a guarantor doesn’t have to be attached to the home loan for its full term. As the value of the property rises and the mortgage continues to be paid down, the borrower can apply to remove their guarantor and take on the home loan in their own capacity.

Can you get a home loan with a 5% deposit?

Many mainstream lenders may be prepared to lend up to 95% of a home’s value, but these high-LVR home loans often come with higher interest rates and other conditions.

For starters, home loans for those with LVRs above 80% are generally subject to LMI. The cost of the insurance will depend on a number of factors, including the size of the deposit. The cost of LMI can often be added to the home loan’s total balance, meaning you’ll pay interest on its cost over the longer term.

Some lenders will occasionally offer LMI waivers to borrowers with less than 20% deposit as part of their lending policy or marketing strategy. Others may grant LMI waivers to those in certain professions.

The table below features lenders offering 95% LVR loans with some of the lowest interest rates on the market.

Important Information and Comparison Rate Warning

How to qualify for a 5% deposit loan

Like a no-deposit home loan, lenders offering 95% LVR mortgages will likely want to feel assured you're diligent in your financial affairs.

If you can prove your 5% deposit is made up of genuine savings and that you’ve always paid your rent on time, this will stand you in good stead.

A lender will also check your credit score to ascertain whether you've paid existing and past debt repayments on time.

Some specialist lenders may still consider lending to you if you have a low credit score or poor credit history, but the pool will be limited and you will be subject to strict eligibility criteria.