Buying a house with no deposit
Buying your first home with no deposit may sound like a dream come true – but do ‘no deposit’ home loans exist?
There’s no getting around it — most lenders generally don’t offer true ‘no deposit’ home loans.
For the very few ‘no deposit’ home loans that do exist, there are generally very tight criteria to meet to be eligible, including a near-perfect credit record and a very stable work history. The loan is also likely to come with a higher interest rate.
However, many lenders offer what could be the next best thing — 5% deposit home loans. The main downside of these loans is that you will almost certainly be asked to pay lenders mortgage insurance. But hey, it could be just what you need to get your first foot up the property ladder.
Can the First Home Owner Grant be my deposit?
Yes! The First Home Owner Grant (FHOG) can usually form at least part of your deposit. However, you still need to allow for the other upfront costs of buying a home, such as legal fees and moving expenses.
If you’re buying a brand new home — or an extensively renovated one — the FHOG will normally be paid on settlement. If you are building a new home, you are likely to receive the FHOG when you make the first progress payment on your loan — typically that’s when the slab is laid.
It’s important to note that each state and territory has different requirements, with some states only offering the FHOG to people buying new homes. Read here to find out what’s on offer in your state or territory.
Can I use my superannuation as my deposit?
You can use your super for your first home deposit if you take advantage of the First Home Super Saver scheme (FHSS). The FHSS is designed to help first homebuyers, like you, save a deposit faster by voluntarily contributing money to your super. These contributions can then be withdrawn to form part of your deposit.
Keep in mind, there are strict rules in place around accessing your superannuation balance before you retire. These rules are designed to ensure that you have enough money to enjoy a comfortable lifestyle once you retire.
In order to access your super before your retirement you’ll need to satisfy strict conditions, so it’s best to speak with a professional, such as your accountant.
How to apply for a no deposit loan as a first homebuyer
If you have a small deposit, it really is worth speaking to someone who knows what they’re doing, such as your local Aussie Broker. This will help you understand whether you meet the conditions that different lenders may impose for no deposit home loans.
If you aren’t ready to meet a broker, but you feel like crunching some numbers, we have handy calculators that you can use to get a rough idea.
Other options for first homebuyers with no deposit
If you have no deposit or very limited savings, you might be able to find resources by tapping into other sources of money.
If your family members are able and willing (and we understand this is not often the case) they could provide a cash gift to increase your deposit. However, there are rules that apply.
Alternatively, if your parents own their home and are willing to guarantee part of your deposit, they could be your guarantor. The guarantor doesn’t need to pay anything, however if their guarantee is worth more than 20% of your home’s value, you may be able to avoid paying lenders mortgage insurance, and that’s a valuable saving.
There’s also the option to use a windfall, such as an inheritance or a monetary gift from family members.
Lenders usually like to see that you saved up for a deposit — it shows that you’re more likely to meet your loan repayments — but some may be willing to accept cash gifts as deposits under certain conditions. The lender may ask for a statutory declaration, which states that the money is being handed over to you unconditionally.
While it may be possible to buy a home using a small deposit, it can be difficult as a first homebuyer to know what choices will suit your needs. An Aussie Broker can help you weigh up your options for saving up a deposit, as well as compare rates across a wide range of options.