Buying with No Deposit: The Risks and Realities

Purchasing property without a deposit is possible under specific circumstances, but it involves a different risk profile and a far narrower range of lenders than a conventional application.

Most lenders in Australia require a minimum deposit of 5 per cent under government guarantee schemes or 10 to 20 per cent for standard lending. A no-deposit application typically relies on a combination of family guarantee, equity in another property, or profession-based lending where the lender waives the deposit requirement based on occupation and income stability. Each of these options carries obligations and limitations that you need to understand before proceeding.

Family Guarantee: How It Works in Practice

A family guarantee is the most common route to purchasing without a personal deposit. A parent or immediate family member uses the equity in their property as security for part of your loan, replacing the deposit you would otherwise need to contribute.

Consider a buyer purchasing at $950,000 in Balwyn with no savings. The buyer needs to borrow the full purchase price plus settlement costs. A parent with a property valued at $1,200,000 and an outstanding loan of $300,000 has $900,000 in equity. The lender may require the parent to guarantee around $190,000, which represents 20 per cent of the purchase price. This allows the buyer to borrow the full amount without paying Lenders Mortgage Insurance. The parent's property is used as security only for the guaranteed portion, not the entire loan. Once the buyer builds enough equity through repayments or capital growth, the guarantee can be released and the parent's property removed from the loan.

The guarantor remains liable for the guaranteed portion until it is formally discharged. If the buyer defaults, the lender can pursue the guarantor's property. This creates a material risk for the guarantor that needs to be discussed openly and understood by all parties. Most lenders require the guarantor to obtain independent legal advice before signing the guarantee.

Profession-Based Lending Without a Deposit

Some lenders offer no-deposit or low-deposit home loans to professionals in specific fields, including medicine, law, accounting, and dentistry. These products are structured around the lender's assessment that certain professions carry lower default risk due to income stability and earning trajectory.

Profession-based lending typically allows borrowing up to 100 per cent of the property value, though the buyer must still cover settlement costs from their own funds. The lender waives or reduces the LMI premium based on the applicant's occupation. Eligibility is generally restricted to professionals who have completed their qualifications and are either in permanent employment or established practice. Recent graduates or contractors may not qualify depending on the lender's policy.

These products are not widely advertised and are offered by a limited number of institutions. The interest rate applied to a no-deposit professional loan is often higher than the equivalent rate for a borrower contributing a 20 per cent deposit, reflecting the higher risk to the lender.

Using Equity in Another Property

If you already own property with sufficient equity, you can use that equity as a deposit for a second purchase without contributing cash. The lender assesses the combined loan-to-value ratio across both properties and may advance funds up to a maximum of 80 per cent of the total security value to avoid LMI, or above 80 per cent with LMI applied.

In a scenario where you own a Balwyn property valued at $800,000 with a loan of $400,000, you have $400,000 in usable equity. To purchase a second property at $700,000, the lender calculates the total lending across both properties. The total security value is $1,500,000. At 80 per cent, the lender can advance up to $1,200,000 without requiring LMI. You currently owe $400,000, leaving $800,000 available for the new purchase. This amount is sufficient to cover the $700,000 purchase price plus associated costs without needing a cash deposit. The lender may structure this as a top-up on the existing loan or as two separate facilities with cross-collateralisation.

Cross-collateralisation means both properties are used as security for both loans. If you default on either loan, the lender can sell either or both properties to recover the debt. This reduces flexibility if you later want to sell or refinance one property independently. Some lenders allow you to structure the loans separately without cross-collateralisation, though this typically requires a lower combined loan-to-value ratio.

LMI and Government Guarantee Schemes

The Australian Government 5% Deposit Scheme allows eligible first home buyers to purchase with a deposit as low as 5 per cent without paying LMI. The scheme applies to properties up to $950,000 in Melbourne and regional centres including Geelong, and up to $650,000 in other parts of Victoria. Balwyn falls within the Melbourne cap, so the $950,000 limit applies.

The scheme does not allow zero deposit. A minimum 5 per cent genuine savings contribution is required, which must be held for at least three months in most cases. Genuine savings can include funds in a bank account, shares, or managed funds, but generally excludes gifted deposits or proceeds from the sale of non-financial assets unless specific conditions are met. The scheme is available only to Australian citizens or permanent residents who have not previously owned property in Australia.

Help to Buy allows a 2 per cent minimum deposit in exchange for the government taking an equity share in the property, but again a cash contribution is required. Neither scheme permits a true no-deposit purchase.

Serviceability and Debt-to-Income Limits

Borrowing the full purchase price plus costs significantly increases your loan amount and your required repayments. Lenders assess your capacity to service the loan by applying a buffer of 3.0 percentage points above the actual interest rate. A loan of $950,000 at a variable rate of 6.2 per cent is assessed at 9.2 per cent, resulting in a serviceability test repayment of around $7,700 per month on a principal and interest basis over 30 years. If your gross income is $12,000 per month, your debt-to-income ratio is approximately 7.9 times, which exceeds the threshold where most lenders face regulatory restrictions on lending volume.

From 1 February 2026, lenders are limited in the proportion of new loans they can write to borrowers with a debt-to-income ratio of six times or greater. This does not mean you cannot borrow above that ratio, but it does mean fewer lenders will approve your application and those that do may apply stricter conditions or higher rates. A borrowing capacity assessment before you begin searching for property will clarify whether your income supports a no-deposit loan in the price range you are considering.

Settlement Costs Without a Deposit

Even if a lender approves a no-deposit loan, you still need to pay settlement costs from your own resources. These typically include conveyancing or legal fees, building and pest inspection, loan establishment fees, and Victorian stamp duty. Stamp duty on a $950,000 property in Victoria for an owner-occupier first home buyer is nil if you qualify for the full exemption, or the standard rate if you do not. Other settlement costs generally range from $8,000 to $15,000 depending on the transaction.

Some lenders permit these costs to be capitalised into the loan, increasing the amount borrowed above the purchase price. This is more common with family guarantee loans and profession-based lending than with standard lending. Capitalising settlement costs increases your loan-to-value ratio and may trigger LMI if the total borrowing exceeds 80 per cent of the property value, or increase the LMI premium if it was already payable.

What Balwyn Buyers Should Know

Balwyn is a well-established suburb with a median property value that sits above the threshold for some first home buyer concessions and close to the cap for the Australian Government 5% Deposit Scheme. The local market includes a high proportion of older detached homes on generous blocks, which tend to be priced above the scheme cap, and a smaller proportion of units and townhouses that may fall within it. If you are relying on a government guarantee or first home buyer concession, the property type and price you can access in Balwyn will be constrained.

The suburb's proximity to the CBD, zoning for well-regarded schools, and established streetscapes contribute to price stability, but also mean entry prices are higher than many other parts of Melbourne. A no-deposit purchase in Balwyn typically requires either strong income to support serviceability at higher borrowing levels or family assistance in the form of a guarantee. If neither is available, a strategy that involves purchasing in a lower-priced suburb to build equity before moving to Balwyn may be more practical than attempting a no-deposit purchase in the suburb itself.

Call one of our team or book an appointment at a time that works for you to discuss whether a no-deposit structure suits your circumstances and which lenders will consider your application.

Frequently Asked Questions