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Home purchases with no deposit could seem too good to be true, but by 2026, it will be a reality through no-deposit or low-deposit home loans. These solutions are enabling first-time consumers and families that have young children to get into the property market earlier than they would have with years of savings saved up.
The conventional route to home ownership requires a large down payment, typically 5-20% of the property’s purchase price. To most, particularly those struggling to afford high rents and the cost of living, years to amass this amount can be spent, and at this time, property rates might have still increased.
In this guide, we’ll explain what no-deposit home loans are, how they work, who can qualify, and what to consider before applying.
What Is a No-Deposit Home Loan?
A no-deposit home loan (also referred to as a 100% home loan or zero-deposit loan) is a mortgage with which you can borrow the entire purchase price of a property without providing a cash deposit.
Difference between traditional home loans and zero-deposit options
| Feature | Traditional Home Loan | No-Deposit Home Loan |
| Upfront Deposit | Typically, 5% to 20% of the property value. | 0% deposit required from the buyer. |
| Loan-to-Value Ratio (LVR) | Usually 80% or less (to avoid LMI), or up to 95%. | 100% or up to 105–110% (with a guarantor). |
| Lender Risk | Lower, due to the borrower’s upfront investment. | Higher, as the bank covers the entire purchase price. |
| Commonly Requires | Proof of genuine savings. | Guarantor support or government backing. |
Why banks and lenders offer this type of loan in 2026
No-deposit facilities are only availed by lenders to appeal to creditworthy clients with steady earnings but insufficient savings. They are frequently designed in 2026 to cut down the risk of the bank by way of:
- Guarantor Security: The property of a member of the family is provided as collateral.
- Government Guarantee: Government guaranteed schemes ensure the Lenders Mortgage Insurance (LMI) that would otherwise be imposed on high Loan-to-Value Ratio (LVR) loans.
- Targeting Low-Risk Borrowers: The loans are generally provided to the applicants who are exceptionally financially stable, i.e. have a high credit score and can successfully make rent/debt payments.
How Do No-Deposit Home Loans Work?
No-deposit home loans replace the need for a cash deposit with an alternative form of security or financial backing.
Understanding the Loan-to-Value Ratio (LVR) and 100% financing
The Loan-to-Value Ratio (LVR) is the percentage of the property’s value that is borrowed.
- A traditional home loan with a 20% deposit has an 80% LVR.
- A no-deposit home loan is a 100% LVR home loan, which is a loan where the lender funds the purchase price.
Due to the high-risk nature of a 100% LVR loan, a standard lender would practically insist that the borrower purchase Lender’s Mortgage Insurance (LMI). Nevertheless, this fee is usually avoided by the most typical means of obtaining a no-deposit loan.
Common requirements such as guarantor support or government schemes
The lending process hinges on mitigating the risk associated with a 100% LVR. The most successful methods involve:
- Guarantor Support: A relative (typically a parent) guarantees the loan in limited terms by securing the loan with some collateral of your own property. This eliminates the requirement of an LMI loan and enables the borrower to borrow up to 100 or even 105-110% (to meet other expenses such as stamp duty).
- Government Schemes: There are government programs that serve as a partial guarantee to the lender, where those who are qualified to be first-time buyers can buy a home by making a small deposit (as low as 2-5%), without being required to pay LMI, which effectively serves as a low or no-deposit program.
Who Can Qualify for a No-Deposit Home Loan?
Eligibility for a no-deposit home loan is generally much stricter than for traditional mortgages. Lenders need a high degree of assurance that you are financially stable and low-risk.
Typical eligibility criteria (credit score, income, job stability)
Lenders assess applicants based on the following leading criteria:
- Excellent Credit History: You must have a perfect credit record with no defaults, late payments, or outstanding debt issues.
- Stable Employment: You need to demonstrate ongoing and reliable income, often with a proven history of continuous employment for at least 12 months in the same job or industry.
- Strong Serviceability: Your income must be high enough to comfortably manage the loan repayments, even at a higher interest rate, while also covering all existing debt and living expenses.
- Genuine Savings (sometimes): Even with a guarantor, some lenders may still require you to demonstrate “genuine savings” (e.g., 5% of the property value saved and held in an account for three to six months) to prove financial discipline.
Importance of having a guarantor or property security
It is hard to find a no-deposit home loan that does not have any type of other security (a guarantor or existing equity).
- Guarantor: The best and most popular method of obtaining a true no-deposit loan is to have a guarantor, as it is seen to lower the LVR to which the lender is exposed, commonly to 80% or less.
- Property Security: Existing property holders are able to transfer the equity acquired in an existing home as the deposits on a new purchase (e.g. an investment property or a new home) and forego the necessity of any cash savings.
First-time buyers vs repeat buyers, what’s different?
- First-Time Buyers: These applicants often rely on Guarantor Home Loans or Government-Backed Schemes (like the First Home Guarantee) to enter the market. The criteria are often slightly more relaxed for first-time buyers under these specific programs.
- Repeat Buyers: These applicants generally use the equity from a property they already own as their deposit for the next purchase. A repeat buyer is unlikely to qualify for a no-deposit loan through a government first-home buyer scheme.
Ways to Buy a Home with No Deposit in 2026
While the term “no-deposit home loan” is broad, it typically refers to a few specific financing strategies:
Option 1: Guarantor home loans
This is the most popular true zero-deposit option. A close family member provides a limited guarantee on a portion of your loan using the equity in their home. This allows you to borrow 100% (or more) of the purchase price without paying LMI. The guarantor’s risk is limited to the portion of the loan they secure, and this support can often be removed once your loan balance drops below 80% of the property’s value.
Option 2: First Home Guarantee or government-backed schemes
The Australian Federal Government has schemes like the First Home Guarantee (FHG) scheme through which eligible first-time buyers can buy a house with a minimal deposit of 5%. Although technically a low-deposit loan, the extra amount of the loan that would otherwise demand LMI (up to 20%) is assured by the government, and tens of thousands of dollars would be saved by the buyer in initial expenses.
Option 3: Using equity from another property
If you already own a property, you can refinance to access the equity you have built up. This equity can then be used as the deposit for a second property (e.g., an investment) or for your next primary residence. This method means you do not need any cash savings for the new purchase.
Option 4: Builder or developer finance deals
Some builders or property developers provide incentives or finance packages that arrange the purchase so the cash needed at the start is less than the cash the buyer would have paid otherwise. These are more uncommon and should be examined keenly since they can be of a high interest or overvalued purchase prices than a normal bank loan.
Benefits of a No-Deposit Home Loan
No-deposit loans are popular because they solve the biggest challenge for new buyers: saving the deposit.
- Entering the property market sooner: The main advantage is speed. You get to purchase a home and start building wealth years earlier than if you waited to save a 20% deposit.
- Avoiding long-term saving hurdles: You bypass the challenge of trying to save a large sum while simultaneously paying high rent and dealing with rising living costs.
- Potential to build equity as property values rise: If the property market experiences growth while you’re in the loan, your equity can increase. This means the money you pay each month is contributing to your own property’s value instead of paying rent to a landlord.
Risks and Considerations Before Applying
Although attractive, no-deposit home loans have huge financial risks that should be taken into account.
- Higher loan repayments and interest costs: Since the LVR is larger (100% LVR or close to 100% LVR), the lenders impose a higher interest rate as compared to mortgages that have an 80% LVR. This will mean an increase in repayments made monthly, and the overall costs of the loan will be much higher.
- Risk of negative equity if property values drop: Negative equity is when the price of your home is lower than the debt that you have with the bank. Being at 100% LVR initially, you will be in negative equity as soon as the market takes a hit. This is just a problem should you want to sell the property because you would be required to pay the bank the shortage.
- Importance of budgeting for additional costs: A no-deposit loan only removes the deposit requirement—it does not remove the other upfront costs of buying a home. You still need funds for:
- Stamp duty (often the largest cost)
- Legal and conveyancing fees
- Building and pest inspections
- Loan establishment fees
Alternatives to a 0-Deposit Home Loan
In case you are not qualified to take the zero-deposit loan or want to reduce certain implications of risks, other low-deposit options are available.
- Saving for a small deposit (5–10%) with government support: It is much easier to save 5% as a deposit than it is to save 20%. This small deposit, when coupled with plans such as the First Home Guarantee, will help you avoid LMI and help you enter the market way faster.
- Shared ownership or rent-to-buy options: There are government or privately funded schemes in which an equity partner (the government or an investor) would make a contribution to the purchase price in exchange for an equity interest in the property. This saves you the burden of having to borrow more money.
- Family pledges or joint applications: In case you cannot secure a guarantor loan, a gifted deposit by a family member (the money is offered without any promise of a return) may be an option. Alternatively, you can have a partner or a relative guaranteed to join you in applying for the loan and that will add to your borrowing ability.
How to Improve Your Chances of Approval for a No-Deposit Home Loan
Tips to strengthen your application
Lenders scrutinise 100% LVR applications heavily. You can significantly improve your chances by:
- Demonstrating Strong Rental History: Proving you have consistently paid rent on time for 12+ months shows the lender you are already capable of managing high monthly expenses.
- Saving “Genuine” Funds: Even if you use a guarantor, proving you can save a small amount of money (even for costs like stamp duty) demonstrates financial discipline.
Reducing debt and improving your credit score
Before applying, focus on cleaning up your finances:
- Pay Down Debts: Reduce or eliminate high-interest debt, especially credit cards, personal loans, and car loans. Lenders calculate your serviceability based on your limits, not just your balance.
- Check Your Credit Report: Obtain a copy of your credit file (e.g., from Equifax) and fix any errors. A perfect credit history is essential for a no-deposit application.
Getting professional help from mortgage brokers
A mortgage broker in Melbourne is invaluable for no-deposit loans because only a handful of lenders offer them, and their criteria constantly change. A broker knows which lenders are most likely to approve your specific situation, saving you time and preventing multiple, potentially damaging, loan application rejections.
Is a No-Deposit Home Loan Right for You?
When this loan makes sense
A no-deposit home loan makes sense if:
- You are a high earner with job security and can comfortably afford the higher repayments, but simply haven’t had time to save the full deposit.
- You have the support of a family guarantor who fully understands the risks and is happy to help you get started.
- You are confident that the property market in your area will continue to rise, making the higher interest costs worth the immediate entry into the market.
When to avoid it and save instead
You should avoid a no-deposit loan if:
- You are already stretching your budget, and higher repayments would cause financial stress.
- Your employment is unstable (e.g., you are on probation or a casual contract).
- Do you have any existing credit issues or a poor history of managing debt
Importance of long-term financial planning
One of the short-term solutions to the deposit problems is the no-deposit loan. A long-term strategy is essential to make the guarantor guarantee (where applicable) unnecessary at some point and refinance the loan at a lower rate as soon as your LVR is lower than 80%.
Final Thoughts on No-Deposit Home Loan
No-deposit home loans are a real and efficient avenue for a specific group of buyers in 2026. They are not a quick fix but a strong weapon which, when wielded well, will speed up your path to homeownership. The key is to know about the increased risk and to make sure that your income and stability are good enough to deal with the increased debt.
Reminder: Compare lenders and seek professional advice. Due to the complexity and diverse eligibility requirements, a no-deposit home loan is not an issue.
Consult with CapKon to discuss no-deposit home loan opportunities in your location and plan the most suitable strategy for your financial future.
FAQ related to No-Deposit Home Loan
Q1: Can I really buy a home with no deposit in 2026?
A: Yes, you can. The most common and effective way is through a Guarantor Home Loan, where a family member uses the equity in their own property as security instead of a cash deposit. Other options include specific government schemes that allow a 5% deposit while waiving the LMI fee.
Q2: What’s the difference between a guarantor loan and a no-deposit home loan?
A: The most typical form of no-deposit home loan is the guarantor loan. The result (0% cash deposit on your part) is called a no-deposit home loan, and the process (using the property of their family members as security) is called a guarantor loan.
Q3: Do I still need to pay stamp duty with a 0-deposit loan?
A: Yes. No-deposit loan eliminates the deposit requirement; however, you must cover all the other purchase expenses, stamp duty, legal fees and government charges. You could borrow extra to meet these expenses by using a guarantor.
Q4: Are no-deposit home loans safe?
A: No-deposit home loans are higher risk than traditional loans. The main risk is that you enter negative equity if property values drop, meaning you owe more than the house is worth. For guarantor loans, there is also a risk to the guarantor’s property if you default on the loan.
Q5: What credit score do I need to qualify for a no-deposit loan?
A: You generally need an excellent credit history. Since the lender is taking on a 100% LVR risk, they typically require applicants to have no black marks, defaults, or late payments on their credit file.
Q6: What happens if I can’t repay a no-deposit home loan?
A: If you default on your repayments, the bank will first seek to recover the debt by selling your property. If the sale price is not enough to cover the outstanding loan amount, and you have a guarantor, the bank can then claim the portion of the guarantor’s property that was used as security.
Q7: Can first-time buyers get government support for no-deposit home loans?
A: Yes. First-time buyers are the primary target for government-backed low-deposit schemes like the First Home Guarantee (FHG). While these schemes usually require a 5% deposit, they are a powerful alternative to zero-deposit loans as they waive the costly Lender’s Mortgage Insurance (LMI).
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