Can you get a mortgage without a deposit in Australia?

No-deposit mortgages in Australia allow individuals to finance the entire purchase price of a home without a traditional deposit, benefiting those unable to save a substantial upfront payment. However, these mortgages come with stringent eligibility requirements, higher interest rates, increased monthly repayments, and the necessity of purchasing Lender’s Mortgage Insurance, making them a high-risk, high-cost option that requires careful financial planning and consideration.

In the traditional home buying process in Australia, securing a deposit is often seen as the first step toward homeownership. However, the rising cost of living and real estate prices have made this increasingly challenging for many potential buyers. This article explores the concept of no-deposit mortgages in Australia, offering insights into how they work and the situations where they might apply, providing an alternative path to homeownership for those who might not have large savings.

Understanding No-Deposit Mortgages

A no-deposit mortgage allows individuals to finance the entire purchase price of their home without a prior saved deposit. This type of mortgage is not typically offered by most lenders due to the high risk associated with full financing. No-deposit loans often require strong financial credentials, including excellent credit scores, stable employment, and sufficient income to cover higher monthly payments.

Eligibility Criteria for No-Deposit Mortgages

Qualifying for a no-deposit mortgage in Australia is generally more stringent than other types of loans. Applicants must have an impeccable credit history, demonstrating reliability in managing debts and finances. Employment stability is crucial, as lenders need assurance of consistent income to cover mortgage payments. Additionally, demonstrating a strong financial standing through other assets or savings can help compensate for the lack of a deposit.

Pros and Cons of No-Deposit Mortgages

The primary benefit of a no-deposit mortgage is that it enables individuals who cannot save a significant deposit to enter the housing market. This is particularly advantageous for young professionals or families starting out. However, the downsides include higher interest rates due to the increased risk to the lender. This can lead to significantly higher lifetime costs of the loan. Additionally, borrowers may face larger monthly repayments and a longer period of indebtedness.

Alternative Options for Low Deposit Loans

For those who find no-deposit options too risky or unattainable, there are alternatives like low deposit loans, which require a smaller deposit, typically around 5% of the purchase price. Government schemes such as the First Home Loan Deposit Scheme also enable first-time homebuyers to purchase a home with a deposit as low as 5% without paying Lender's Mortgage Insurance, making homeownership more accessible.

Guarantors for No-Deposit Mortgages

In many cases, no-deposit mortgages are facilitated by the presence of a guarantor. A guarantor, typically a close family member with their own property, agrees to provide security for the loan. While this can make it easier to get approval for the loan, it also means that the guarantor’s assets are at risk if the borrower fails to make repayments.

Lender’s Mortgage Insurance (LMI) and Other Fees

No-deposit loans almost invariably require the borrower to purchase Lender’s Mortgage Insurance (LMI), which protects the lender—not the borrower—in case of default. LMI can be a substantial additional cost, often adding thousands of dollars to the total cost of the loan. Borrowers should also be aware of other potential fees and costs associated with mortgage agreements.

Case Studies

Consider the case of Emma, a marketing executive who secured a no-deposit mortgage thanks to her excellent credit score and the financial backing of her parents as guarantors. She was able to purchase her first home without the initial capital that would otherwise have taken years to save. However, she faces higher monthly repayments and has taken on the cost of LMI. Another example is Liam, who utilised a government scheme to buy a home with a 5% deposit, avoiding the risks associated with no-deposit mortgages but benefiting from reduced upfront costs.


No-deposit mortgages offer an intriguing option for potential homeowners in Australia who find themselves without sufficient savings to cover a traditional deposit. While they do provide a means to purchase a home, they come with higher costs and increased financial risk. It is essential for individuals considering this mortgage option to carefully assess their financial situation and consult with financial advisors to ensure that taking such a loan is a prudent decision. Ultimately, no-deposit mortgages can be a viable option, but they require careful consideration and planning.

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