Beginner's Guide to Buying with No Deposit

Can You Actually Buy a Home with No Deposit?

You can purchase a property without a full 20% deposit, and in some cases with as little as 2% or even no personal savings.

Most lenders require either a minimum 5% deposit or a guarantor who uses their property equity to cover the deposit shortfall. The Australian Government 5% Deposit Scheme allows eligible first home buyers to purchase with a 5% deposit without paying Lenders Mortgage Insurance, while eligible single parents can enter the scheme with just 2%. Guarantor arrangements, typically involving a parent or close family member, enable some buyers to borrow without any deposit at all. Both paths require careful consideration of repayment capacity, ongoing costs, and the obligations placed on guarantors.

The barrier for most Melbourne buyers is not finding a loan structure that works, it is demonstrating genuine savings and proving they can service the loan amount at assessed rates. A lender will still calculate repayments at a buffer rate well above the actual interest rate, and your borrowing capacity will be determined by your income, existing debts, and living expenses regardless of deposit size.

How the Australian Government 5% Deposit Scheme Works in Melbourne

The scheme removes the need for LMI when you purchase with a 5% deposit, provided you meet the eligibility criteria and the property falls within the applicable price cap.

In Melbourne and regional centres across Victoria, the property price cap is $950,000. In other areas of Victoria, the cap is $650,000. Both the purchase price and the lender's valuation must sit at or below the cap. Housing Australia guarantees up to 15% of the property value to the participating lender, bringing the combined deposit and guarantee to 20% without the borrower paying for LMI. There are no income limits, and no annual place limits apply since the scheme expanded in October 2025.

You apply through one of the participating lenders, not directly to Housing Australia. The panel includes major banks and a range of non-major lenders. Not all lenders offer the same home loan rates or loan features, so it is worth comparing your options even within the scheme. You must be a first home buyer, an Australian citizen or permanent resident, and at least 18 years of age. You need to live in the property for at least six months within the first year of settlement.

Consider a buyer purchasing a townhouse in Ringwood at $900,000. With a 5% deposit of $45,000 and the scheme guarantee covering the remaining 15%, the buyer avoids an LMI premium that would otherwise add around $30,000 to $35,000 to the loan amount. The loan amount is $855,000, and the buyer still needs to cover stamp duty and other settlement costs, which in this scenario would be approximately $50,000 including duty, conveyancing, and inspection fees. The total upfront cash required is around $95,000, with the deposit component forming less than half of that figure.

Guarantor Arrangements and How They Remove the Deposit Requirement

A guarantor uses the equity in their own property to secure part of your loan, which means you can borrow up to 100% of the purchase price without needing personal savings for a deposit.

The guarantor does not hand over any money. Instead, they allow the lender to register a mortgage over their property for a portion of your loan, typically the amount that exceeds 80% of your property's value. If your loan is $800,000 and the property is valued at $750,000, the guarantor's property would secure the $200,000 that exceeds the 80% loan to value ratio on your home. The lender holds security over both properties until you build enough equity to release the guarantor, which usually happens within a few years as you pay down the loan or if property values rise.

Guarantors are almost always parents or close family members, and they remain liable for the portion of the loan they guarantee. If you default, the lender can pursue the guarantor's property. That creates a significant obligation, and most brokers will only proceed with a guarantor arrangement when the buyer has stable income, a clear repayment plan, and the guarantor fully understands the risk. We regularly see parents willing to help, but the conversation needs to cover what happens if circumstances change, how long the guarantee will remain in place, and what happens if the guarantor wants to sell or refinance their own property before you can release them.

What About Help to Buy?

Help to Buy allows the Australian Government to take an equity share of up to 30% for an existing home or 40% for a new home, reducing the amount you need to borrow and the deposit required to as little as 2%.

The scheme is available to first home buyers with an individual income up to $103,000 or a combined income up to $165,000 for couples or single parents. The government does not charge rent or interest on its share, but when you sell or buy out the government's share, they receive their proportional share of any capital gain or loss. Property price caps apply and vary by location, so you need to check the postcode search tool at firsthomebuyers.gov.au to confirm eligibility for a specific property. You cannot combine Help to Buy with the Australian Government 5% Deposit Scheme, though you can generally use it alongside state-based stamp duty concessions or grants depending on the jurisdiction.

The scheme suits buyers who want to lower their loan amount and reduce ongoing repayments rather than maximise leverage. It also requires you to be comfortable with shared ownership and the eventual need to buy out the government's share or sell the property. From a borrowing capacity perspective, Help to Buy can make the difference between being able to service a loan or falling short, particularly for buyers near the income threshold who are purchasing close to the price cap.

Settlement Costs You Still Need to Cover

Even when you borrow the full purchase price, you will need cash for stamp duty, conveyancing, building and pest inspections, and other settlement expenses.

In Victoria, stamp duty on a $750,000 property for an owner-occupier first home buyer is currently reduced or waived under the state concession, but if the property exceeds the applicable threshold or you do not meet the first home buyer criteria, duty can reach $40,000 or more. Conveyancing typically costs between $1,500 and $3,000, building and pest inspections add another $600 to $1,200, and lender establishment fees vary but can reach $600. If you are borrowing more than 80% of the property value and not using a government scheme, you will also need to pay LMI, which can add tens of thousands to your loan amount or upfront costs depending on the lender's payment structure.

Some lenders allow you to capitalise these costs into the loan if you are using a guarantor, meaning the guarantor's security covers the additional borrowing. That approach keeps your upfront cash requirement lower but increases your loan amount and ongoing repayments. If you are using the Australian Government 5% Deposit Scheme, you cannot borrow more than the property value, so all settlement costs must be paid from your own funds. Planning for these costs early, and understanding which can be capitalised and which cannot, is critical when structuring a low deposit or no deposit purchase.

Serviceability and Why It Matters More Than Deposit Size

Lenders assess your ability to repay the loan at a rate higher than the actual variable or fixed rate you will pay, and that assessment determines whether you can borrow the amount you need regardless of your deposit.

Most lenders apply a serviceability buffer of 3% above the loan's interest rate, meaning if the rate is 6.2%, they assess your repayments as though the rate is 9.2%. They also include your existing debts, living expenses, and any dependents when calculating how much you can afford. A buyer with a $120,000 income, no dependents, and minimal living expenses might be able to service a loan of $900,000, while a buyer with the same income but a car loan, childcare costs, and higher rent may only qualify for $650,000. The deposit amount does not change that calculation.

If you are relying on a guarantor or a low deposit scheme, your income and expense position becomes even more important because the lender will want to see that you can manage repayments without relying on the guarantor to step in. A strong history of meeting rent or other regular payment obligations, stable employment, and minimal discretionary spending in the months leading up to application all contribute to a stronger serviceability assessment. If your income is borderline, consider speaking to a broker who can model your position across multiple lenders, as serviceability policies vary and some lenders apply lower buffers or treat certain income types more favourably.

Should You Wait to Save a Larger Deposit?

If property prices are rising faster than you can save, entering the market sooner with a smaller deposit may leave you in a stronger position than waiting.

A buyer who purchased in Croydon or Doncaster with a 5% deposit two years ago would have built equity through capital growth and principal repayments, even after paying a higher interest rate on a larger loan. A buyer who waited to save 20% would have needed to save an additional $40,000 to $60,000 while prices moved further out of reach. The comparison is not abstract. It depends on the rate of price growth in the area you are targeting, the interest rate difference between an 80% loan and a 95% loan, and how long it will realistically take you to save the additional deposit.

The decision also depends on your risk tolerance and job security. Borrowing with a guarantor or a low deposit increases your exposure if prices fall or if you need to sell before building equity. If your income is variable or your employment is contract-based, a larger deposit provides more buffer and reduces the risk of negative equity. There is no universal answer, but the question should be framed around your specific circumstances and the trade-offs that matter to you, not around a general principle that bigger deposits are always better.

Call one of our team or book an appointment at a time that works for you. We will walk through your income, savings, and the property price range you are targeting, and show you what is possible now versus what waiting might achieve. That conversation is specific, not theoretical, and it gives you the information you need to decide with confidence.

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