18 Dec 2024 Struggling to Save for Homeownership in 2025? Home Loans with No Deposit in Melbourne Explained
Home loans with no deposit are expected to increase this 2025, as they become a popular option for Melbourne first-time buyers struggling to save for a deposit. These loans allow buyers to enter Melbourne’s property market without needing a large upfront deposit, often by using additional security like a guarantor.
EverLend mortgage brokers are experts in guiding clients through the no-deposit home loan process, from understanding eligibility criteria to exploring available grants and incentives. With their expert support, owning your dream home in Melbourne could be closer than you think.
This guide is designed to help first-home buyers and eligible borrowers navigate every step of the process, from meeting eligibility requirements to discovering the key benefits of no-deposit loans. Let’s dive in and explore how you can make homeownership a reality.
What Are Home Loans with No Deposit?
No deposit home loans are unique financing solutions that allow buyers to secure a property without a traditional deposit. Instead of using personal savings, borrowers often rely on additional security, such as a guarantor.
Unlike standard home loans, no deposit loans may involve stricter eligibility criteria, higher interest rates, or additional costs like lenders mortgage insurance. They’re tailored for first-home buyers and those who lack the upfront deposit to step onto the property ladder.
How Do No-Deposit Home Loans Work?
No-deposit home loans allow buyers to purchase a property without providing a cash deposit upfront. Instead, lenders require additional security, such as a guarantor’s property equity or sufficient equity in another property.
To better understand how this works, let’s look at a simple scenario:
Imagine you’re purchasing a home in Melbourne for $600,000. Since you don’t have a cash deposit, your parents act as guarantors, using $150,000 of equity from their home as security.
This eliminates the need for a deposit but might still require paying LMI, depending on the lender’s policies. Your monthly repayments for a 30-year loan term (at a variable rate of 6%) would be approximately $3,597 per month.
This type of loan helps buyers enter the property market sooner, but it’s important to plan for additional costs like mortgage insurance and legal fees.
Why Are No-Deposit Home Loans Becoming Popular in Melbourne?
No-deposit home loans are becoming increasingly popular in Melbourne, particularly among first-time buyers, as property prices and affordability pressures continue to rise. As of 2024, Melbourne’s median house price sits at approximately $920,000, while units average $615,000, making a traditional 20% deposit ($184,000 for a house) a significant barrier for many buyers (Domain).
At the same time, Melbourne’s rental market has tightened, with median weekly rent for houses at $580 and units at $500 per week, creating additional challenges for renters trying to save for a deposit (CoreLogic). Rising living costs mean many buyers are turning to no-deposit home loans as a faster way to enter the property market without waiting years to save a large upfront deposit.
Government incentives like the First Home Owner Grant in Victoria (up to $10,000) and the Family Home Guarantee for single parents also make no-deposit home loans more accessible by reducing upfront costs (State Revenue Office Victoria).
Looking ahead, experts suggest Melbourne’s property prices could stabilise in 2025 due to increased housing supply, but demand among first-home buyers will remain strong as affordability challenges persist (ABC News). In this environment, no-deposit home loans are becoming a practical and appealing option for buyers eager to step onto the property ladder sooner.
6 Benefits of Home Loans with No Deposit in Melbourne
No-deposit home loans offer a range of advantages, especially for first-time buyers struggling to save a deposit. These loans make it easier to step onto the property ladder in Melbourne’s thriving property market.
- Faster Entry into the Property Market: No deposit loans eliminate the need for years of saving for a house deposit. This allows eligible buyers to secure a home even with rising property prices.
- Access to Government Incentives: Programs like the Family Home Guarantee and first-home buyer grants can reduce upfront costs. These government schemes provide financial support to eligible first-time buyers or single parents.
- Avoid Renting Costs: Owning a home means escaping rental nightmares and high monthly rent. Mortgage repayments on a no-deposit loan can often be similar to rental payments.
- Support from Guarantor Loans: Guarantor home loans allow family members to offer additional security, making the loan journey smoother. This reduces lenders mortgage insurance costs and increases borrowing capacity.
- Flexibility for First-Time Buyers: No deposit home loans cater to buyers with stable income but limited savings. This makes it easier for eligible home buyers to purchase their first property without upfront costs.
- Potential to Build Equity Sooner: Stepping onto the property ladder earlier can help build sufficient equity. Early equity growth helps reduce the loan balance and creates long-term financial stability.
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Eligibility Criteria for Home Loans with No Deposit
Qualifying for a no-deposit home loan involves meeting specific requirements that lenders use to assess risk. Lenders look closely at credit history, income stability, and additional security to determine eligibility. Here are the key criteria:
- Strong Credit History and Credit Score: Lenders require a well-maintained repayment history and a credit score of at least 650 to show financial reliability. A poor credit history or Bad credit can lead to stricter eligibility criteria or higher mortgage insurance costs.
- Stable Income and Borrowing Capacity: A stable source of income and continuous employment are essential to prove repayment ability. Lenders also assess borrowing capacity by considering living expenses, existing credit card debt, and monthly repayments.
- Additional Security or a Guarantor: Many no deposit loans require a guarantor loan or sufficient equity from a family member’s property. This provides additional security to reduce lenders mortgage insurance and upfront costs.
- Eligibility for Government Grants: Eligible first-home buyers can access programs like the Family Home Guarantee or first-home buyer grants. These government incentives help cover upfront costs and make no deposit mortgages more accessible.
- Proof of Financial Record and Track Record: Lenders expect proof of income, identification documents, and evidence of genuine savings. A strong financial record and minimal personal loans improve your chances of obtaining unconditional approval.
How to Apply for Home Loans with No Deposit in Melbourne
Applying for a no deposit home loan requires a clear understanding of the process and careful preparation. Follow these steps to navigate the loan journey smoothly and secure the right loan for your needs.
1. Check Eligibility Requirements
Review your credit score and financial record to ensure they meet lending policies. Lenders also consider stable income, living expenses, and well-maintained repayment history.
2. Explore Government Grants and Incentives
Government schemes, like the Family Home Guarantee, can help eligible first-time buyers cover the entire purchase price. These programs reduce upfront costs and provide alternatives for single parents and first-home buyers.
3. Secure a Guarantor for Additional Security
Guarantor loans use additional security, such as property equity from a family guarantor, to back your application. This reduces lenders mortgage insurance costs and increases your borrowing capacity.
4. Find a Suitable Loan Provider
Compare major lenders, non-bank lenders, and traditional lenders to identify the best deposit loans or low-deposit home loans. Look for loan features like low rates, flexible Variable Rate options, and minimal upfront fees.
5. Prepare and Submit Required Documents
Gather proof of income, identification documents, and records of genuine savings. Your broker can assist with the loan application and ensure all required documents meet eligibility criteria for unconditional approval.
Case Study: How Georgia Bought Her First Home in Melbourne with a No-Deposit Home Loan
Georgia, a 28-year-old teacher in Melbourne, dreamed of owning her first home but struggled to save a deposit due to rising rent and living expenses. She discovered no-deposit home loans and contacted EverLend mortgage brokers for guidance.
After assessing Georgia’s financial circumstances, including her stable income, good credit score, and borrowing capacity, EverLend suggested a guarantor home loan. Georgia’s parents offered $120,000 of equity from their property as additional security. With this support, she avoided the need for a cash deposit and minimised upfront costs like lenders mortgage insurance.
Georgia purchased a $500,000 home in Melbourne’s suburbs and began her loan repayments of $2,987 per month over a 30-year loan term with a competitive variable rate. Thanks to the expert guidance of EverLend brokers, Georgia confidently entered the property market without years of saving for a deposit.
This example highlights how no-deposit home loans can help first-time buyers achieve homeownership sooner with the right support.
Risks and Challenges of No-Deposit Home Loans
While no-deposit home loans make it easier to enter the property market, they also come with certain risks and challenges. It’s important to understand these before committing to ensure it’s the right option for your financial circumstances.
- Higher Interest Rates: Lenders may charge higher interest rates on no-deposit home loans due to the increased risk. This can result in larger monthly repayments over the loan term.
- Lenders Mortgage Insurance (LMI): Without a deposit or sufficient equity, you may need to pay LMI, which adds to the upfront costs. This extra cost can make a no-deposit loan more expensive in the long term.
- Stricter Eligibility Criteria: Lenders typically require a strong credit score, stable income, and additional security like a guarantor. Meeting these stricter eligibility requirements can be challenging for some borrowers.
- Risk of Negative Equity: If property prices fall, you could owe more than the home’s value. This is particularly risky in Melbourne’s fluctuating property market.
- Limited Borrowing Capacity: Lenders may restrict your borrowing power for no-deposit loans, limiting the types of properties you can afford. This could affect your ability to buy in certain areas or secure land packages.
Despite these challenges, experienced mortgage brokers like the team at EverLend can guide you through the risks, connect you with suitable lenders, and explore options such as guarantor loans or government grants to help reduce costs.
With EverLend by your side, you’ll have the support and expertise needed to make informed decisions at every step of your home loan journey.
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We’ve helped thousands of locals.
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FAQs
How to buy a house in Australia with no deposit?
You’ll likely need a guarantor loan or access government schemes like the Family Home Guarantee. Mortgage brokers can connect you with lenders who offer these options.
How much deposit do you need for a house in Melbourne?
A standard deposit ranges from 10-20% of the purchase price. However, no deposit home loans eliminate this requirement for eligible borrowers.
What if you don’t have a deposit for a house?
Explore guarantor home loans or government incentives, which allow buyers to secure a property without a deposit.
Can I buy a house with $10,000 deposit?
Yes, low-deposit home loans and first-home buyer grants can make this possible, depending on the lender.
What are lenders’ typical requirements for no-deposit loans?
Lenders look for strong credit history, stable income, guarantor support, and eligibility for grants.
Are no-deposit loans more expensive?
They may include extra costs like lenders mortgage insurance and slightly higher interest rates.
Who is eligible for the Family Home Guarantee?
Single parents with dependents who meet income and property price caps can apply.
Wrapping Up
Home loans with no deposit can open doors to homeownership in 2025 for eligible Melbourne-based first-time buyers, especially in a challenging property market.
Our main office is located in St. Kilda, but we proudly offer our services across the whole of Melbourne, helping clients in every suburb turn their vision into reality. If you’re ready to take the first step towards your dream home or renovation project, call us today at 03 7036 3356, or visit EverLend to book a free consultation with our award-winning team, who will work on finding personalised financial solutions for you.