No deposit home loans, and what they really mean today
The true no-deposit home loan has mostly disappeared from the market. A handful of products still exist, but they sit behind very strict criteria — typically a near-perfect credit record and a stable employment history, with some carve-outs for medical professionals and other higher-income, lower-risk occupations. For most people the more accurate question is not "can I buy with no deposit", but "how do I get into the market with little or no cash of my own, and which structure carries the least cost and risk along the way."
That distinction matters, because there is more than one route in. A low-deposit loan can let you borrow up to 95% of the purchase price, meaning you contribute around 5% up front. A guarantor arrangement can take that to 100% with no Lenders Mortgage Insurance. And several of the alternatives below remove the deposit problem entirely by sourcing it from somewhere other than your savings account.
There is no one-size-fits-all answer with no- or low-deposit lending. Bigger banks usually impose stricter conditions but offer lower rates; other lenders lift the risk threshold and charge more for it, which raises both your monthly repayment and your longer-term cost. The point worth holding onto is that the first loan does not have to be the last. As you build a little equity and your position matures, you can often refinance out of a restrictive product into one with more room. Keep in mind, too, that with no- and low-deposit loans you may still need to fund LMI and stamp duty on top.
Routes in when you don't have the cash deposit
If you don't have savings for a deposit and would rather not chase a scarce no-deposit product, several alternatives can supply the deposit instead.
- A one-off financial gift. Family who are able and willing can gift cash toward your deposit. Each lender treats gifted funds differently — some want evidence it is genuinely non-repayable, others apply seasoning rules — so the gift needs to be documented in a way the chosen lender will accept.
- Existing equity. Equity in a property you already own is generally acceptable in place of a cash deposit. You are using that property as additional security — effectively guaranteeing yourself. Refinancing the existing loan as part of the structure can also bring a cash-back into play with some lenders.
- The First Home Guarantee. Under the federal government's First Home Guarantee (the successor to the First Home Loan Deposit Scheme), eligible first home buyers can purchase with a deposit as low as 5% without paying LMI, because the government guarantees the balance. Places are capped and eligibility criteria apply, so it is worth confirming current settings before you rely on it.
- A personal loan. It is possible to fund a deposit with a personal loan, but it limits your borrowing capacity — you are servicing an additional debt — so it is generally treated as a last resort. Tight limits apply: typically a clear credit record, a strong income, and only modest existing debt. For most borrowers a guarantor loan is the better structure, since it allows up to 100% borrowing with no LMI rather than stacking a second repayment on top.
- The First Home Super Saver Scheme (FHSSS). The FHSSS lets eligible first home buyers use the superannuation system as a tax-effective way to save part of a deposit. If you are 18 or over and meet the criteria, you can withdraw eligible voluntary contributions (made since 1 July 2017), plus associated earnings, up to the current release cap. The favourable tax treatment inside super is designed to help the deposit grow faster than it would outside it. Whether the FHSSS suits your circumstances is a question for your accountant or licensed financial adviser.
- Self-managed super. In some cases an SMSF can borrow to buy property, though this route generally suits investors rather than owner-occupiers, since you can't live in a fund-owned property. SMSF lending carries significant rules and compliance obligations, and the suitability of the structure is a matter for your licensed financial adviser and accountant — what we provide here is general information and the credit side only.
Why the guarantor loan usually wins
Across the options above, the guarantor loan is the one we most often see fit the largest share of borrowers. A guarantor — usually a parent — offers their own property as additional security, which lets you borrow up to 100% of the purchase price without LMI. It can open the door even where your own credit record is less than perfect, because the security profile of the loan changes.
It is not unconditional. Lenders still expect you to satisfy their criteria, which commonly includes genuine savings of around 5% and the serviceability to carry the repayments on your own income. And the structure deserves care, because a guarantor is putting their property on the line: a well-built guarantor loan is set up so the guarantee can be released once you have built enough equity to stand on your own, rather than tying the family together indefinitely.
That release point is the structural detail most people miss. Whether you start with a 95% loan, the First Home Guarantee, gifted funds or a guarantor, the loan should be designed with the exit in mind — the moment your equity and conduct qualify you for a stronger, cheaper product. The deposit gets you in; the structure determines what it costs you to stay and how cleanly you move up from there.
If getting into the market without a full deposit is the question, it is worth mapping properly — which route fits your circumstances, which lenders will consider you, and how to structure the borrowing so today's loan doesn't become tomorrow's constraint.
Book a strategy session and we will work through where you genuinely stand.
General information only — not personal financial product or credit advice. Lending is subject to each lender's policy, your full circumstances and responsible-lending assessment. SMSF and superannuation strategies should be confirmed with your licensed financial adviser and accountant. AeFin is an Australian Credit Representative (CR 464548) of Finsure (ACL 384704).