Buying a house is often considered one of the biggest financial goals in a person’s life. For many Australians, the biggest hurdle to homeownership is saving for a deposit. Traditionally, lenders require at least a 20% deposit to avoid Lenders Mortgage Insurance (LMI), and even a minimum deposit of 5-10% can amount to tens of thousands of dollars depending on property prices. But is it possible to buy a house with no deposit at all in Australia?
The short answer is: yes, it’s possible—but with conditions and caveats. In this blog post, we’ll explore what “no deposit” really means, the ways it can be done, the risks involved, and whether it’s the right choice for you.
What Does “No Deposit” Mean?
Buying a house with “no deposit” typically doesn’t mean no money is involved at all. It usually means you’re not putting down your own savings upfront, but the home loan still covers the full property price—or more. In most cases, lenders still want some form of security, whether through guarantors, equity from other properties, or government schemes.
1. Guarantor Loans: The Most Common No Deposit Option
A guarantor loan is one of the most popular ways to buy a house with no deposit in Australia. In this scenario, a close family member—usually a parent—uses the equity in their own home as security for your loan.
How It Works:
- You borrow 100% (or sometimes more) of the purchase price.
- Your guarantor offers part of the value of their home as security (often up to 20%).
- This allows you to avoid paying LMI.
- Over time, as your property gains value and your mortgage reduces, the guarantor can be released.
Pros:
- You can enter the property market sooner.
- You may avoid costly LMI.
- Helps buyers who have stable income but haven’t had time to save.
Cons:
- Your family member’s property is at risk if you default.
- Can place strain on personal relationships.
- Not all lenders offer guarantor loans.
2. Using Government Schemes
The Australian government has introduced several schemes to help first-home buyers, and some of them can assist with low or no deposit options.
First Home Guarantee (FHBG):
- Formerly known as the First Home Loan Deposit Scheme.
- Allows eligible buyers to purchase with as little as 5% deposit, with the government guaranteeing the remaining 15%.
- No LMI is required.
- There are price and income caps, and limited spots each year.
Family Home Guarantee:
- Designed for single parents with dependents.
- Only 2% deposit is needed, with the government guaranteeing up to 18%.
- Applicable to both first-home buyers and previous homeowners.
Regional First Home Buyer Guarantee:
- Aimed at helping regional Australians buy with a 5% deposit.
Note: These schemes don’t eliminate the need for any deposit but drastically reduce how much is required—and can help you buy with little to no savings.
3. Builder or Developer Promotions
Some property developers offer “no deposit” house and land packages, especially in outer suburbs or new estates. These offers can sound enticing, but they often come with strings attached.
Common Features:
- The house builder may cover your deposit or include it in the overall loan.
- You may be required to qualify for a 100% loan or have access to a guarantor.
- These deals often apply only to first-home buyers.
Risks:
- Higher property prices may be built into the contract.
- Limited property options.
- Some lenders may not approve these types of arrangements.
4. Personal Loans or Credit Cards to Fund a Deposit
Using a personal loan or credit card to fund a deposit is a technically possible—but extremely risky and generally discouraged—method.
Why It’s Risky:
- Most lenders won’t accept borrowed funds as a genuine deposit.
- Increases your debt-to-income ratio.
- Higher risk of loan rejection.
- Can lead to financial hardship.
Some lenders may allow this in special circumstances (e.g., high income, low expenses, excellent credit score), but it’s not advisable for most people.
5. Equity in an Existing Property
If you’re not a first-home buyer and already own property, you may be able to use the equity in your existing home as the deposit for a new purchase.
How:
- Refinance your current home loan and extract equity.
- Use it as the deposit for your next property.
- Common for investors or people upgrading homes.
Key Considerations Before Buying with No Deposit
While the appeal of buying a house with no deposit is understandable, there are important things to consider:
1. Higher Risk of Negative Equity
If the property value drops and you’ve borrowed 100% of its value, you may end up owing more than it’s worth.
2. Stricter Lending Criteria
Lenders take on more risk with 100% loans, so they often require excellent credit, stable income, and a strong employment history.
3. Limited Lender Options
Not all lenders offer no deposit or guarantor loans. You may need to go through a mortgage broker to access more flexible products.
4. Emotional and Financial Strain on Guarantors
If using a family guarantor, ensure everyone fully understands the risks. It’s not just your future that’s impacted.
Conclusion: Is Buying with No Deposit Right for You?
Yes, it’s possible to buy a house with no deposit in Australia—but it’s not for everyone.
It can work well for:
- First-home buyers with supportive family.
- Those eligible for government schemes.
- Buyers in specific developer promotions.
However, it’s important to weigh the risks carefully. Just because you can doesn’t always mean you should. Ensure your finances are in good order, get professional advice, and consider both the short- and long-term implications before taking the plunge.
Final Tip:
Speak to a mortgage broker or financial advisor who understands the landscape. They can assess your personal situation and guide you toward the best (and safest) path to homeownership.
