The 10 most frequently asked questions on no-deposit home loans

10 FAQs about no-deposit home loans 

1. Can I buy a house with no deposit?

Yes, buying a house with no deposit is possible, but it requires exploring alternative financing options such as no-deposit home loans, guarantor loans, or government schemes.

Our mortgage broker is here to assist you in navigating these questions in greater detail.

Let us help you secure a home loan without the need for a deposit.

Call us on 1300 475 525 or contact us online.

2. How do no-deposit home loans work?

No-deposit home loans allow you to finance the entire purchase price of a home without a traditional cash deposit. Instead, these loans may be secured using alternative methods such as a guarantor’s property, equity in another property, or through special rent-to-own programs. 

The lender will assess your financial stability and creditworthiness before approving the loan.

3. What are the eligibility requirements for a no-deposit home loan?

Eligibility requirements for no-deposit home loans typically include a strong credit score, stable income, and a solid financial history. Some lenders may require you to have a guarantor or use equity from another property as collateral. 

Additionally, you may need to meet specific criteria set by government schemes or lender programs.

4. What is Lender's Mortgage Insurance (LMI), and do I need it for a no-deposit home loan?

Lenders Mortgage Insurance (LMI) protects the lender if you default on your home loan. Due to the higher risk involved, no-deposit home loans usually require LMI.

 The cost of LMI can be substantial and is often added to your loan amount, making it an important factor to consider when budgeting for your home purchase.

5. Are there any government incentives or grants available for no-deposit home buyers?

Yes, there are government incentives and grants available for no-deposit home buyers. Programs like the First Home Owner Grant (FHOG) and the First Home Loan Deposit Scheme (FHLDS) can assist with reducing the upfront costs of buying a home. These programs vary by state and territory, so it’s essential to research what’s available in your area.

6. What are the risks associated with no-deposit home loans?

The risks associated with no-deposit home loans include higher interest rates, additional costs such as paying lenders mortgage insurance (LMI), and stricter lending criteria. If property values decrease, you could owe more than the property's worth. Additionally, relying on a guarantor puts their property at risk if you default on the loan.

7. Can I use a guarantor to secure a no-deposit home loan?

Yes, you can use a guarantor to secure a no-deposit home loan. A guarantor, usually a family member, provides additional security for the loan by using their property, such as the family home, as a guarantee.

Having a guarantor can help you qualify for the loan and potentially avoid LMI. However, it’s important to understand the risks and responsibilities for both you and the guarantor. To learn more about guarantor loans, including how they compare to other home loan options, explore our blog: How do guarantor loans work?

8. How does using equity from another property work for a no-deposit home loan?

Using equity from another property involves leveraging the value of your existing property. Equity is the difference between the market value of your property and the amount you owe on it. You can use this equity as collateral to secure a no-deposit home loan by refinancing or taking out a line of credit. This method allows you to buy a new home without a cash deposit.

9. What is the difference between a no-deposit home loan and a low-deposit home loan?

A no-deposit home loan finances the entire purchase price of a home, eliminating the need for a cash deposit. In contrast, a low-deposit home loan requires a small deposit, typically around 5% of the property’s value. Both options often involve higher interest rates and LMI, but a low-deposit loan may have slightly more lenient lending criteria than a no-deposit loan.

10. How do I find a reputable lender or mortgage broker for a no-deposit home loan?

Our reputable mortgage brokers have experience in no-deposit home loans and a proven track record of helping clients secure financing.

Schedule a consultation to discuss your home loan application today! Call us on 1300 475 525 or contact us online.