What are no deposit home loans?

No deposit home loans are mortgages where the lender does not require the applicant to pay a deposit.

Who offers no deposit home loans?

In Australia, many lenders no longer offer no deposit home loans. While it is very difficult to find a no deposit home loan, other options may be available. 

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3.19%

Fixed - 3 years

3.74%

Heritage Bank

$1.5k

Redraw facility
Offset Account
Borrow up to 95%
Extra Repayments
Interest Only
Owner Occupied

4.08

/ 5
More details

3.58%

Fixed - 5 years

4.18%

Newcastle Permanent

$1.5k

Redraw facility
Offset Account
Borrow up to 95%
Extra Repayments
Interest Only
Owner Occupied

3.53

/ 5
More details

3.58%

Fixed - 4 years

4.21%

Newcastle Permanent

$1.5k

Redraw facility
Offset Account
Borrow up to 95%
Extra Repayments
Interest Only
Owner Occupied

3.37

/ 5
More details

3.39%

Variable

3.39%

Hume Bank

$1.5k

Redraw facility
Offset Account
Borrow up to 95%
Extra Repayments
Interest Only
Owner Occupied

3.95

/ 5
More details

3.49%

Fixed - 1 year

3.81%

Heritage Bank

$1.5k

Redraw facility
Offset Account
Borrow up to 95%
Extra Repayments
Interest Only
Owner Occupied

3.85

/ 5
More details

2.98%

Fixed - 3 years

4.39%

CUA

$1.4k

Redraw facility
Offset Account
Borrow up to 95%
Extra Repayments
Interest Only
Owner Occupied

3.31

/ 5
More details

3.24%

Fixed - 1 year

4.26%

Newcastle Permanent

$1.5k

Redraw facility
Offset Account
Borrow up to 95%
Extra Repayments
Interest Only
Owner Occupied

2.96

/ 5
More details

3.39%

Variable

3.39%

Hume Bank

$1.5k

Redraw facility
Offset Account
Borrow up to 95%
Extra Repayments
Interest Only
Owner Occupied

3.89

/ 5
More details

4.41%

Variable

4.45%

Bank Australia

$1.7k

Redraw facility
Offset Account
Borrow up to 95%
Extra Repayments
Interest Only
Owner Occupied

2.60

/ 5
More details

3.74%

Variable

4.29%

IMB Bank

$1.5k

Redraw facility
Offset Account
Borrow up to 95%
Extra Repayments
Interest Only
Owner Occupied

3.38

/ 5
More details

3.37%

Variable

3.42%

SCU

$1.5k

Redraw facility
Offset Account
Borrow up to 95%
Extra Repayments
Interest Only
Owner Occupied

3.79

/ 5
More details

3.59%

Variable

3.64%

SCU

$1.5k

Redraw facility
Offset Account
Borrow up to 95%
Extra Repayments
Interest Only
Owner Occupied

3.94

/ 5
More details

3.65%

Variable

3.67%

State Custodians

$1.5k

Redraw facility
Offset Account
Borrow up to 95%
Extra Repayments
Interest Only
Owner Occupied

3.68

/ 5
More details

3.14%

Fixed - 2 years

3.75%

Heritage Bank

$1.4k

Redraw facility
Offset Account
Borrow up to 95%
Extra Repayments
Interest Only
Owner Occupied

4.04

/ 5
More details

3.90%

Variable

3.91%

State Custodians

$1.6k

Redraw facility
Offset Account
Borrow up to 95%
Extra Repayments
Interest Only
Owner Occupied

3.30

/ 5
More details

3.79%

Fixed - 5 years

3.95%

Heritage Bank

$1.5k

Redraw facility
Offset Account
Borrow up to 95%
Extra Repayments
Interest Only
Owner Occupied

3.31

/ 5
More details

4.24%

Fixed - 1 year

4.00%

State Custodians

$1.6k

Redraw facility
Offset Account
Borrow up to 95%
Extra Repayments
Interest Only
Owner Occupied

3.45

/ 5
More details

4.39%

Fixed - 2 years

4.05%

State Custodians

$1.6k

Redraw facility
Offset Account
Borrow up to 95%
Extra Repayments
Interest Only
Owner Occupied

3.17

/ 5
More details

4.59%

Fixed - 3 years

4.14%

State Custodians

$1.7k

Redraw facility
Offset Account
Borrow up to 95%
Extra Repayments
Interest Only
Owner Occupied

2.76

/ 5
More details

3.24%

Fixed - 3 years

4.15%

Newcastle Permanent

$1.5k

Redraw facility
Offset Account
Borrow up to 95%
Extra Repayments
Interest Only
Owner Occupied

3.52

/ 5
More details

Learn more about home loans

Why don't lenders offer no deposit home loans?

There was a time when a typical Australian could borrow 100 per cent or even 105 per cent of the value of their property. But that's no longer the case.

Few lenders offer no deposit home loans because of the risk involved. Regulators believe that if interest rates were to increase, borrowers with small or no deposits would be at higher risk of being unable to afford their loans and defaulting on their mortgage repayments. 

These regulators want to remove this risk from the mortgage system, due to its potential negative impact on Australia's banking system and wider economy.

What are some alternatives to no deposit home loans?

Although no deposit home loans are scarce and may not available, there are alternatives.

One alternative to a no deposit home loan is a guarantor loan. This is a mortgage where a parent or close family member guarantees your loan. If you were to default on your loan, your guarantor would be responsible for making your payments.

Another alternative is a 95 per cent home loan. A home loan with a 95 per cent loan to value ratio (LVR) will allow you to pay a low deposit on your mortgage.

If you already have a home loan, you may be able to take out a new mortgage without paying a deposit. Instead, you could secure your loan using the equity in your current property. Your equity equals the current value of your property minus what you still owe on your mortgage. If your property’s value has grown in recent years, you could have more equity than you expect.

What are high LVR home loans?

Your mortgage’s Loan to Value Ratio (LVR) compares the amount you borrow to the value of the property. The higher your mortgage's LVR, the lower the deposit you’ll need to pay, and vice versa. 

A high LVR home loan will have an LVR higher than 80 per cent. This means you’d pay a deposit of less than 20 per cent of your property's value.

Imagine buying a home worth $300,000. A high LVR home loan may have a 95 per cent LVR, meaning you’d need to pay a 5 per cent deposit. This means you’d receive a loan of $285,000 and pay a deposit of $15,000.

Who offers high LVR home loans?

High LVR home loans are offered by banks, credit unions and non-bank lenders. Each will have different rates, fees and features. It’s best to compare high LVR home loans before you apply.

How do you compare high LVR home loans?

When comparing high LVR home loans, consider the interest rate, fees and maximum LVR. Decide how much you can afford to deposit and what LVR you need. Ensure you can afford to make the repayments on time and in full.

What are the extra costs of high LVR home loans?

While a high LVR home loan means paying a smaller deposit, there may be other upfront costs to also think about. Like other home loans, you’ll need to consider stamp duty, conveyancing, other transaction costs. 

Before you apply for a high LVR home loan, it’s important to think about lender’s mortgage insurance, or LMI. This is an insurance policy designed to protect the lender (not the borrower) if you default on your loan repayments. Many lenders insist that borrowers take out LMI with high LVR mortgages.

Most lenders pass the cost of LMI on to the borrower, which can make a big difference to your home loan’s upfront cost. Depending on your deposit, you could pay thousands or even tens of thousands of dollars in LMI. 

One way to avoid being charged LMI is to get support from a guarantor. If they can guarantee part or all of a 20 per cent deposit, you may not need to pay the extra cost of LMI.

 

Example

Imagine that you want to buy your first home for $400,000. You have a steady income and have saved $20,000, which is 5 per cent of the property price.

You may think you’re all set, because you meet the minimum deposit required for a 95 per cent LVR home loan. However, according to the RateCity LMI calculator, you may need to pay more than $12,000 extra to cover the cost of LMI.

If you don’t want to save these extra funds, you could ask your parents to guarantee your 95 per cent LVR home loan. If they can help cover an extra 15 per cent deposit ($60,000), you may be able to secure the high LVR home loan and purchase your first property.

This example is for illustrative purposes only. 

How can you improve your chances of being approved for a high LVR home loan?

One way to improve your chances of being approved for a high LVR home loan is to choose a loan that allows a family pledge or guarantor. This can be especially important if you’re looking for bad credit home loans. A guarantor will be responsible for making your repayments if you default, which gives peace of mind to the lender.

You could speak to a mortgage broker who specialises in borrowers with low deposits. They may be able to tell you about special home loan offers that aren’t advertised. They can also negotiate with lenders on your behalf. 

What are the pros and cons of high LVR home loans?

High LVR home loans have upsides and downsides. One benefit is being able to buy sooner. This could potentially save you money in the long run, as you can spend less ‘dead money’ on rent and get ahead of a potentially rising property market.

However, high LVR home loans also have drawbacks. One is that the eligibility criteria is strict. Applicants typically must have good credit and a history of paying on time.

Another disadvantage is that you will probably have to pay LMI.  If you were to refinance down the track, this may not be transferable. Unless you could afford a higher deposit at that time, you may have to pay LMI again.

How to save for a house deposit

If want a home loan but have no money saved for a deposit, there are ways to make the saving process seem less daunting.

Budgeting your incoming and outgoing expenses is one way to start saving for a home loan: 

  • Spend a month recording money going into and out of your account
  • Work out how much you have left over to save at the end
  • Take a critical look at what you spend your money on
  • Cut down on any unnecessary expenses

Keeping your money in a high-interest savings account can also help you reach your goal of saving a home loan deposit much faster. The more money you put in an account with a high interest rate, the more interest you could earn. Try to maintain a high enough minimum balance that you make more money in interest per year than the loan’s annual fee will cost you.

Frequently asked questions

What are the pros and cons of no-deposit home loans?

It’s no longer possible to get a no-deposit home loan in Australia. In some circumstances, you might be able to take out a mortgage with a 5 per cent deposit – but before you do so, it’s important to weigh up the pros and cons.

The big advantage of borrowing 95 per cent (also known as a 95 per cent home loan) is that you get to buy your property sooner. That may be particularly important if you plan to purchase in a rising market, where prices are increasing faster than you can accumulate savings.

But 95 per cent home loans also have disadvantages. First, the 95 per cent home loan market is relatively small, so you’ll have fewer options to choose from. Second, you’ll probably have to pay LMI (lender’s mortgage insurance). Third, you’ll probably be charged a higher interest rate. Fourth, the more you borrow, the more you’ll ultimately have to pay in interest. Fifth, if your property declines in value, your mortgage might end up being worth more than your home.

What is a low-deposit home loan?

A low-deposit home loan is a mortgage where you need to borrow more than 80 per cent of the purchase price – in other words, your deposit is less than 20 per cent of the purchase price.

For example, if you want to buy a $500,000 property, you’ll need a low-deposit home loan if your deposit is less than $100,000 and therefore you need to borrow more than $400,000.

As a general rule, you’ll need to pay LMI (lender’s mortgage insurance) if you take out a low-deposit home loan. You can use this LMI calculator to estimate your LMI payment.

What is a loan-to-value ratio (LVR)?

A loan-to-value ratio (otherwise known as a Loan to Valuation Ratio or LVR), is a calculation lenders make to work out the value of your loan versus the value of your property, expressed as a percentage.   Lenders use this calculation to help assess your suitability for a home loan, and whether you need to pay lender’s mortgage insurance (LMI). As a general rule, most banks will require you to pay LMI if your loan-to-value ratio is 80 per cent or more.   LVR is worked out by dividing the loan amount by the value of the property. If you are looking for a quick ball-park estimate of LVR, the size of your deposit is a good indicator as it is directly proportionate to your LVR. For instance, a loan with an LVR of 80 per cent requires a deposit of 20 per cent, while a 90 per cent LVR requires 10 per cent down payment. 

LOAN AMOUNT / PROPERTY VALUE = LVR%

While this all sounds simple enough, it is worth doing a more accurate calculation of LVR before you commit to buying a place as there are some traps to be aware of. Firstly, the ‘loan amount’ is the price you paid for the property plus additional costs such as stamp duty and legal fees, minus your deposit amount. Secondly, the ‘property value’ is determined by your lender’s valuation of the property, not the price you paid for it, and sometimes these can differ so where possible, try and get your bank to evaluate the property before you put in an offer.

Does Australia have no-deposit home loans?

Australia no longer has no-deposit home loans – or 100 per cent home loans as they’re also known – because they’re regarded as too risky.

However, some lenders allow some borrowers to take out mortgages with a 5 per cent deposit.

Another option is to source a deposit from elsewhere – either by using a parental guarantee or by drawing out equity from another property.

How do you determine which home loan rates/products I’m shown?

When you check your home loan rate, you’ll supply some basic information about your current loan, including:

  • the amount owing on your mortgage
  • the value of your property
  • your current interest rate
  • name of existing lender
  • property address

We’ll compare this information to the home loan options in the RateCity database, and show you which home loan products you may be eligible to apply for.

How do I take out a low-deposit home loan?

If you want to take out a low-deposit home loan, it might be a good idea to consult a mortgage broker who can give you professional financial advice and organise the mortgage for you.

Another way to take out a low-deposit home loan is to do your own research with a comparison website like RateCity. Once you’ve identified your preferred mortgage, you can apply through RateCity or go direct to the lender.

How much can I borrow with a guaranteed home loan?

Some lenders will allow you to borrow 100 per cent of the value of the property with a guaranteed home loan. For that to happen, the lender would have to feel confident in your ability to pay off the mortgage and in the security provided by your guarantor.

How do I refinance my home loan?

Refinancing your home loan can involve a bit of paperwork but if you are moving on to a lower rate, it can save you thousands of dollars in the long-run. The first step is finding another loan on the market that you think will save you money over time or offer features that your current loan does not have. Once you have selected a couple of loans you are interested in, compare them with your current loan to see if you will save money in the long term on interest rates and fees. Remember to factor in any break fees and set up fees when assessing the cost of switching.

Once you have decided on a new loan it is simply a matter of contacting your existing and future lender to get the new loan set up. Beware that some lenders will revert your loan back to a 25 or 30 year term when you refinance which may mean initial lower repayments but may cost you more in the long run.

How much deposit will I need to buy a house?

A deposit of 20 per cent or more is ideal as it’s typically the amount a lender sees as ‘safe’. Being a safe borrower is a good position to be in as you’ll have a range of lenders to pick from, with some likely to offer up a lower interest rate as a reward. Additionally, a deposit of over 20 per cent usually eliminates the need for lender’s mortgage insurance (LMI) which can add thousands to the cost of buying your home.

While you can get a loan with as little as 5 per cent deposit, it’s definitely not the most advisable way to enter the home loan market. Banks view people with low deposits as ‘high risk’ and often charge higher interest rates as a precaution. The smaller your deposit, the more you’ll also have to pay in LMI as it works on a sliding scale dependent on your deposit size.

How can I get a home loan with bad credit?

If you want to get a home loan with bad credit, you need to convince a lender that your problems are behind you and that you will, indeed, be able to repay a mortgage.

One step you might want to take is to visit a mortgage broker who specialises in bad credit home loans (also known as ‘non-conforming home loans’ or ‘sub-prime home loans’). An experienced broker will know which lenders to approach, and how to plead your case with each of them.

Two points to bear in mind are:

  • Many home loan lenders don’t provide bad credit mortgages
  • Each lender has its own policies, and therefore favours different things

If you’d prefer to directly approach the lender yourself, you’re more likely to find success with smaller non-bank lenders that specialise in bad credit home loans (as opposed to bigger banks that prefer ‘vanilla’ mortgages). That’s because these smaller lenders are more likely to treat you as a unique individual rather than judge you according to a one-size-fits-all policy.

Lenders try to minimise their risk, so if you want to get a home loan with bad credit, you need to do everything you can to convince lenders that you’re safer than your credit history might suggest. If possible, provide paperwork that shows:

  • You have a secure job
  • You have a steady income
  • You’ve been reducing your debts
  • You’ve been increasing your savings

Home Loans Frequently Asked Questions

Who has the best home loan?

Determining who has the ‘best’ home loan really does depend on your own personal circumstances and requirements. It may be tempting to judge a loan merely on the interest rate but there can be added value in the extras on offer, such as offset and redraw facilities, that aren’t available with all low rate loans.

To determine which loan is the best for you, think about whether you would prefer the consistency of a fixed loan or the flexibility and potential benefits of a variable loan. Then determine which features will be necessary throughout the life of your loan. Thirdly, consider how much you are willing to pay in fees for the loan you want. Once you find the perfect combination of these three elements you are on your way to determining the best loan for you. 

How common are low-deposit home loans?

Low-deposit home loans aren’t as common as they once were, because they’re regarded as relatively risky and the banking regulator (APRA) is trying to reduce risk from the mortgage market.

However, if you do your research, you’ll find there is still a fairly wide selection of banks, credit unions and non-bank lenders that offers low-deposit home loans.

What if I can't pay off my guaranteed home loan?

If you can’t pay off your guaranteed home loan, your lender might chase your guarantor for the money.

A guaranteed home loan is a legally binding agreement in which the guarantor assumes overall responsibility for the mortgage. So if the borrower falls behind on their mortgage, the lender might insist that the guarantor cover the repayments. If the guarantor fails to do so, the lender might seize the guarantor’s security (which is often the family home) so it can recoup its money.

The fine print – what are the eligibility criteria?

This competition is only available to Australian residents who are over 18 and check their home loan interest rate at RateCity. However, you are not required to refinance your home loan or apply for any financial products.

You can still enter if you don’t have a home loan yet – enter how much you plan to borrow and the details of the property you’re considering, and we’ll compare mortgage offers that may suit your needs and estimate how much you could save compared to a loan with an average interest rate. 

How can I pay off my home loan faster?

The quickest way to pay off your home loan is to make regular extra contributions in addition to your monthly repayments to pay down the principal as fast as possible. This in turn reduces the amount of interest paid overall and shortens the length of the loan.

Another option may be to increase the frequency of your payments to fortnightly or weekly, rather than monthly, which may then reduce the amount of interest you are charged, depending on how your lender calculates repayments.

When should I switch home loans?

The answer to this question is dependent on your personal circumstances – there is no best time for refinancing that will apply to everyone.

If you want a lower interest rate but are happy with the other aspects of your loan it may be worth calling your lender to see if you can negotiate a better deal. If you have some equity up your sleeve – at least 20 per cent – and have done your homework to see what other lenders are offering new customers, pick up the phone to your bank and negotiate. If they aren’t prepared to offer you lower rate or fees, then you’ve already done the research, so consider switching.

What is a redraw fee?

Redraw fees are charged by your lender when you want to take money you have already paid into your mortgage back out. Typically, banks will only allow you to take money out of your loan if you have a redraw facility attached to your loan, and the money you are taking out is part of any additional repayments you’ve made. The average redraw fee is around $19 however there are plenty of lenders who include a number of fee-free redraws a year. Tip: Negative-gearers beware – any money redrawn is often treated as new borrowing for tax purposes, so there may be limits on how you can use it if you want to maximise your tax deduction.

Does the Rate Guarantee apply to discounted interest rate offers, such as honeymoon rates?

No. Temporary discounts to home loan interest rates will expire after a limited time, so they aren’t valid for comparing home loans as part of the Rate Guarantee.

However, if your home loan has been discounted from the lender’s standard rate on a permanent basis, you can check if we can find an even lower rate that could apply to you.

Why do people use no credit check loans?