No deposit loans

Get on the pathway of homeownership without a deposit.
No deposit loans are a way to get the finance you need to purchase your property without any upfront payment. And in some cases, you won’t need lenders mortgage insurance (LMI).

No deposit loans are usually:

  • a guarantor loan
  • equity based.

Guarantor loan

A guarantor is someone who’s willing to use their real property as security to guarantee they’ll be responsible for repayments if the borrower can’t make those repayments for any reason. Usually, guarantors are family members who want to help their family get underway with buying a property but will want this to be a short-term solution—certainly not for the life of the loan—while the property’s value increases and therefore generates equity in the loan.

For a guarantor to be eligible, they need sufficient equity in their mortgage. Lenders use this to assess if the guarantor can make repayments easily (through a liquidity calculation) if the borrower defaults for a certain period.

How guarantor loans work

Impact on borrower/owner

Impact on guarantor

Borrow up to 105% of property value
Equity guarantee for 20% of the borrowers’ purchase price
Potentially higher rate on repayments
Their current mortgage loan-value-ratio (LVR) must be 80% or less
Lenders mortgage insurance waived due to the guarantor’s property used as security
Once the owner (borrower) pays certain loan amount (usually 20%), the guarantor is released and security is removed from their property’s title
Total borrowed amount (80% + guarantor’s 25%) allows 5% to be used towards stamp duty/conveyancing costs
Could reduce their leverage for future/increased loans

To protect and respect the borrower-guarantor relationship, you must get advice on whether the numbers work if the worst-case scenario happens (i.e. borrower defaults) and other economic factors. The guarantor needs to also consider their plans for their property and future lending. They’re essentially giving up some of their leverage by supporting their family by being guarantor.


Using equity in your current home loan is great point of leverage and advantage. It takes time to save money for a deposit but it’s going to take longer when committed to existing repayments. And taking on an investment property has clear tax advantages. However, you must assess if these advantages will be offset by borrowing 100% on a new property without a deposit, as repayments will be higher.

The Get Real Finance team helps you to make informed decisions about the short-term and long-term impacts.