How to buy a home with no deposit

It’s not for everyone, but it’s not impossible to buy a home in Australia with no deposit – you will need to meet certain criteria, lets take a look.

You can buy a home and borrow the full purchase price, often the associated costs – and in one instance first home buyers can add a debt or take some cash out for renovations too – by using a family guarantee.

What is a family guarantee? This is a policy where a close family member offers their property as a limited second security to your lender.

The intention of the policy is really simply stated to get you into the property market – not to help you build an empire - so most often it is limited to your ‘only’ property with very few exceptions. This could be your home, your first home, or an investment purchase where you don’t currently own a home or there isn’t enough equity to aid the purchase.

Not everyone is a suitable guarantor & guarantors need to be aware of the risks and be able to meet the payments if necessary, but also because the guarantee is limited, and, can be removed when you have enough equity on your own they are a very popular choice.

Just before we move on – there are lots of articles about having just X% deposit, what they don’t make clear enough is that in addition to these figures you typically need more money to cover stamp duty, legal fees, searches and checks and other government charges. If you’re a first home buyer in some instances you can avoid stamp duty which helps a lot but you still need ‘enough’ cash or guarantee to cover the rest – and this is on top of any deposit amount you do, or don’t, have. As a guide, without any discounts or benefits you should budget for a little under 5% of the purchase price to cover this.

OK we don’t have a guarantor, do we need 20% deposit?

20% deposit – or an 80% loan is a magical figure in Australian lending where there is no “Lenders mortgage insurance” (a mandatory insurance that protects the lender but the bill is yours), but it isn’t necessary to have a 20% deposit. Even if you can’t use a guarantee there are other ways to get around this.

First home buyer? You may be able to qualify for the various first home lenders deposit schemes which allow you to borrow up to 95% of the property value – which means you only need 5% deposit plus “enough” to cover your costs (stamp duty and legal fees etc). These schemes have a limited number of places and some strict criteria around citizenship, income and property price caps but otherwise are an awesome fast track into your first home.

Not your first home – but a single parent re-entering the market? News is even better for you because the scheme for single parents allows for 2% deposit plus “enough”, and again the criteria is strict including proving you have a dependant under the qualifying age but its possible.

If none of these fit your bill then there are still options, if you have 5% (plus enough for costs) 8% or more there are entry points which do not require you to have 20% deposit.

So now you know you don’t have to save forever, what are you waiting for?