You might be wondering, can you buy a house with no deposit? The short answer is yes, but it comes with some conditions. In Australia, there are no deposit home loan options available, but they often require specific arrangements, such as a guarantor or higher lending requirements. Let’s break down how this works and what you need to consider.
No Deposit Home Loans Explained
A no-deposit home loan allows you to purchase a property without putting down the standard deposit, which is usually 20% of the property’s value. Instead, you may need a guarantor—typically a family member—who uses the equity in their property as security for your loan. This can help you enter the property market sooner, without waiting years to save up for a deposit. However, this approach requires serious commitment and risk-sharing from your guarantor.
What Are the Risks?
While no-deposit home loans may seem appealing, they come with risks. For one, the guarantor's property is on the line, meaning if you can't meet your mortgage repayments, they might be required to step in or their own home could be at risk. Additionally, these loans may carry higher interest rates or stricter lending criteria. Some lenders may also require you to pay Lenders Mortgage Insurance (LMI), which adds to the cost.
Alternative Low Deposit Options
If you can’t get a guarantor, you might explore other low-deposit options. Some lenders offer home loans with only 5% or 10% deposits. However, with these loans, LMI is generally required, adding to your upfront costs.
For more details on no-deposit home loans, and to see if you qualify, visit FHBA to explore your options and get expert advice. Ready to dive into the property market without a deposit? Contact us at FHBA (First Home Buyers Australia) to find out how you can get started on your homeownership journey!