No Deposit Home Loans

Utilize Existing Equity As A Deposit

If you are already a property owner, some lenders accept home equity as a viable deposit option.

• If you have substantial equity in your property, it is possible to secure a loan without the need for any additional savings.
• This can be achieved by leveraging your existing equity through the process of refinancing.
• Some lenders may even offer a cash rebate as an incentive to refinance.
• We can provide a complimentary property valuation; contact us at (03) 6144 9669 or inquire online to determine your eligibility.

If neither of these no-deposit home loan options suits your circumstances, consider exploring low-deposit options.

Low-Deposit Home Loan Alternatives

1. First Home Guarantee:

• A nationwide program designed to assist first-time homebuyers in acquiring a property with a deposit as low as 5%, without the requirement for Lenders Mortgage Insurance.
• Eligibility criteria include:
  • A minimum deposit of at least 5% (most lenders require genuine savings for this deposit).
  • Single first-home buyers with annual incomes up to $125,000 and couples earning up to $200,000 (including family members or friends living together).
  • Expanded eligibility for single parents with at least one dependent child, as well as legal guardians, such as aunts, uncles, and grandparents.
  • Intention to occupy the property as the principal place of residence (owner-occupier).
  • Australian citizenship or permanent residency.
• You can access detailed information about this program on our First Home Guarantee page.

2. Gifted Deposit Home Loan:

• Parents can provide a lump sum as a gift with no repayment requirement.
• Key details include:
  • Parents offering 5% to 15% of the purchase price as a non-refundable gift.
  • Parents offering 5% to 15% of the purchase price as a non-refundable gift.
  • Approximately 60% of first-time homebuyers receive assistance from their parents.
• Further insights can be found on our no genuine savings or gifted deposit pages.

3. Personal Loan as a Deposit:

• Using a personal loan as a home deposit is an option, but it’s not favored by many lenders due to the need to manage repayments for both the personal loan and the home loan.
• Requirements and considerations include:
  • A minimum deposit of 5% of the property value.
  • A high income.
  • The ability to borrow up to 95% of the purchase price plus the personal loan.
  • Existing debt not exceeding $10,000.
  • A clear credit history.
• This option may not be suitable for everyone, and it’s advisable to explore a guarantor loan after consulting with your parents.

4. Borrowed Deposit:

• Some lenders permit a borrowed deposit and do not mandate genuine savings. However, it may be necessary to have some personal funds available to cover expenses like stamp duty.
• Key aspects include:
  • The ability to borrow up to 80% of the property’s purchase price.
  • Superannuation funds act as the deposit, eliminating the need for personal savings.
• It’s essential to note that this strategy is intricate and should be initiated after seeking financial advice.

For further clarification and to determine the most suitable option for your situation, we’ve developed a no-deposit home loan calculator to guide you when purchasing a home without a deposit.

Consider Applying for a Shared-Equity Scheme

Shared-equity schemes involve equity partners who serve as both lenders and investors in a property. These partners contribute a portion of the property’s purchase price in exchange for a share in the property. In most cases, a minimum deposit of 5% of the property price is necessary.

• Several shared-equity schemes and arrangements are available in Australia, including:
  • The nationwide Help To Buy scheme, where the government contributes 40% for new builds and 30% for existing properties.
  • State and territory-specific schemes.

These arrangements offer a pathway to homeownership with a lower initial deposit, making it an option to explore.

For additional details and eligibility, refer to our buying property in an SMSF page.

If you find yourself in a state of confusion, don’t hesitate to reach out for assistance and guidance tailored to your specific circumstances.

Pros And Cons Of No-Deposit Home Loans

No-deposit home loans come with a set of advantages and disadvantages that can vary based on individual financial situations, economic conditions, and the specific loan terms and conditions.

• Pros:
  • Accessibility: These loans make homeownership accessible to individuals without substantial savings, broadening the pool of potential homebuyers.
  • Faster home ownership: By eliminating the need to save for a deposit, buyers can expedite the process of purchasing a home, potentially achieving homeownership sooner.
  • Investment opportunities: Some individuals use no-deposit loans to enter the property market as investors, enabling them to benefit from potential property appreciation.
  • Potential for government assistance: First-time buyers may have access to government grants or incentives that can be combined with no-deposit loans, providing additional financial support.
• Cons:
  • Stricter eligibility requirements: Lenders typically impose stringent criteria, including a strong credit history, stable employment, and a demonstrated history of financial responsibility, making qualification more challenging.
  • Limited choices: No-deposit home loans are not offered by all lenders, which limits the choices available to potential homebuyers.
  • Higher risk of negative equity: If property values decline, borrowers may find themselves owing more on the mortgage than the property is worth, as they began with no equity in the property.
  • Potential for over-borrowing: Without a deposit requirement to cap the loan size, there is a risk of borrowing more than is financially sustainable, potentially leading to financial strain in the future.

The decision to pursue a no-deposit home loan should be carefully considered, weighing these pros and cons against one’s individual circumstances and long-term financial goals.

How To Secure Approval For A Home Loan Without A Deposit

If you are pursuing a no-deposit home loan, it’s important to understand the lending criteria that lenders typically assess when evaluating your application. Here’s what lenders commonly consider when reviewing your no-deposit home loan application:

1. Credit History:

A pristine credit history with Equifax is a fundamental requirement. Lenders in Australia are typically unwavering in this criterion, particularly if Lenders Mortgage Insurance (LMI) approval is necessary.

2. Repayment History:

Timely payment of all your existing financial obligations, including credit cards, personal loans, and rent, is crucial.

3. Location Restrictions:

The property you intend to purchase must be located in a major town, capital city, or regional center. While some lenders are more flexible in this regard, most adhere to strict location requirements.

4. Property Type:

The property you plan to buy should be a standard type, such as a house, townhouse, unit, or vacant land. Generally, unusual or unique properties are not acceptable.

5. Stable Employment:

A stable and ongoing employment situation is typically a prerequisite.

6. Income:

Your income must be sufficient to comfortably service the loan. Lenders are usually cautious about extending high Loan-to-Value Ratio (LVR) mortgages that would max out your borrowing capacity.

7. Profession:

Certain professions, including accountants, lawyers, doctors, veterinarians, nurses, government employees, and teachers, are highly sought after by lenders due to their lower risk profile. While being in one of these professions is not mandatory, it can enhance your approval prospects.

For those uncertain about their eligibility for a 100% home loan, don’t hesitate to reach out for personalized guidance. You can contact us at (03) 6144 9669 or submit an online enquiry at no cost to assess your options.

For A Home Loan Without A Deposit:

If you have a guarantor, you typically do not need any personal savings to secure a no-deposit home loan. However, in all other scenarios, you will generally be required to save 5% to 10% of the property’s purchase price. The specific deposit amount can vary depending on your situation:

• First-Home Buyer: A 5% deposit is typically required. First-time buyers may also have the option to use the First Home Owners Grant to cover property-related costs, and they may benefit from stamp duty concessions or exemptions. In many cases, having a guarantor is the optimal choice for first-home buyers looking for loans without a deposit.
• Second-Home Buyer: A 10% deposit is typically required. In addition to the deposit, you will need to cover costs such as stamp duty and conveyancing. Some lenders may accept gifted deposits or allow you to use equity from your first home to meet the deposit requirements.
• Investors: A 10% deposit is generally required for property investors. Investors do not have access to government grants or stamp-duty exemptions that are typically available to first-home buyers.
• Building a Property / Construction: When financing the construction of a property, it’s advisable to have additional savings on hand. Construction financing is provided in stages, and having extra funds can help cover potential cost overruns.

In summary, while a guarantor can eliminate the need for personal savings, most borrowers will need to save at least a 5% to 10% deposit when seeking a home loan without a deposit, depending on their specific circumstances and goals.

How To Apply For A No-Deposit Home Loan

Our team of specialized bad credit mortgage brokers boasts extensive experience and is ready to assist you.

Several of our senior brokers have a background in major bank credit departments, equipping them with the knowledge and expertise needed to construct a compelling case for bad credit home loans.

Whether you have questions or need guidance, don’t hesitate to contact us:

• Phone: Call us at (03) 6144 9669

We’re here to support you in your journey to homeownership, even if you’ve faced credit challenges in the past.