Owning a home is a dream for many, but the high deposit requirements can be a significant barrier, especially for first-time buyers or individuals with limited savings. No deposit home loans can help overcome this hurdle and make homeownership more accessible.
What is a No Deposit Home Loan?
A no deposit home loan allows individuals to finance the entire purchase price of a property without needing to make a down payment. The most common type in Australia is the guarantor home loan, where a family member’s property is used as security.
Types of No Deposit Home Loans
105% Guarantor Loan
- Borrow 105% of the purchase price.
- No savings required.
- Guarantor, usually parents, provides security using their property.
- Suitable for those without a deposit.
Gifted Deposit Loan
- Parents provide a lump sum as a non-refundable gift.
- Suitable for those who receive financial help from family.
OwnHome’s Deposit loan
- 15 year loan term which covers the 20% deposit.
- Allows borrowing up to 100% of the property value without LIMI cost.
- Available to FHB and owner occupiers.
Equity as a Deposit
- Homeowners can use equity from their existing property as a deposit.
- No savings needed.
- Refinance options available, sometimes with cash rebates.
Personal Loan as a Deposit
- Use a personal loan for the deposit.
- Requires a minimum 5% deposit and a high income.
- Not favoured by many lenders due to dual repayment obligations.
First Home Loan Deposit Scheme
- Enables first-time buyers to purchase with as little as a 5% deposit.
- Avoids Lenders Mortgage Insurance (LMI).
- Income and citizenship criteria apply.
Using Super to Buy a House
- Use superannuation as a deposit for investment properties.
- Set up a self-managed superannuation fund (SMSF).
- Borrow up to 80% of the purchase price.
Benefits of No Deposit Home Loans
Reduced Upfront Costs: Eliminates the need for a large down payment, focusing funds on other costs like inspections and legal fees.
Enter the Market Sooner: Helps buyers secure properties faster, especially in rising markets.
Homeownership without Lengthy Saving Periods: Allows individuals to own homes without waiting years to save a deposit.
Considerations and Requirements
High Income and Stable Employment: Essential for qualifying.
Guarantor Requirements: Guarantors must have sufficient equity and are usually parents.
Higher Interest Rates and Longer Repayment Periods: Potentially higher costs over the loan term.
Active Loan Management: Making extra payments or refinancing can optimise loan terms.
No deposit and low deposit home loans provide viable paths to homeownership for first-time buyers and those with limited savings. They offer various benefits, such as reduced upfront costs and quicker market entry, though they come with specific requirements and potential higher costs. Exploring these options can bring you closer to owning your dream home.