Simple hacks to buy a home with no deposit in Victoria

Can you really buy a home in Victoria with no deposit?

You can buy a home in Victoria without having saved a full deposit by using a family guarantee, applying through the Australian Government 5% Deposit Scheme, or combining equity in another property with lender approval. The option that works for you depends on whether you have family willing to offer security, whether you meet the criteria for a government-backed scheme, and what your income and employment situation looks like.

Consider a buyer earning $85,000 annually who wants to purchase a unit within the scheme's price cap for Victoria. They have saved $30,000 but would need roughly $47,500 for a standard 5% deposit plus costs on a property at the regional centre cap. Through the 5% Deposit Scheme, they put down their full $30,000 as a 5% deposit on a $600,000 property, and Housing Australia guarantees the next 15% to the lender. The buyer avoids paying lenders mortgage insurance, which would have added thousands to their upfront costs, and settles without needing to wait another year or two to build their savings further.

Another scenario involves a buyer with parents who own their home outright in Frankston. The parents offer a portion of their property as security, allowing the buyer to borrow the full purchase price without needing any cash deposit. The buyer services the loan entirely from their own income, and the parents' property is not at risk as long as repayments are maintained. Once the buyer has paid down enough of the loan or the property has increased in value, the guarantee can be removed.

How does a family guarantee work for Victorian buyers?

A family guarantee allows a parent or close family member to use equity in their own property as additional security for your home loan so you can borrow up to 100% of the purchase price without paying lenders mortgage insurance. The guarantor does not make repayments on your behalf. They simply allow the lender to use a portion of their property as backup security, typically up to 20% of your purchase price or loan amount.

The guarantor's property must have sufficient equity and be unencumbered or have a low loan balance. Most lenders require the guarantor to be a parent, though some will consider siblings or grandparents. The guarantor remains liable for the portion of the loan secured against their property until you request a release, which typically happens once your loan balance falls below 80% of your property's value.

In a typical setup for a $650,000 purchase in Geelong, the lender might take security over your new property for $520,000 and security over your parent's home for $130,000. Your parents are not responsible for the full loan amount, only the $130,000 portion secured against their property. Once you have repaid enough of the loan or your property value rises, you can apply to remove the guarantee. Many buyers reach this point within three to five years, depending on income and market conditions.

What is the Australian Government 5% Deposit Scheme and who qualifies?

The Australian Government 5% Deposit Scheme allows eligible first home buyers to purchase with a deposit of as little as 5% of the property value, with Housing Australia providing a guarantee to the lender of up to 15% of the property value. No income caps apply and no annual place limits apply. You apply through a participating lender, not directly through Housing Australia.

For Victoria, the property price cap is $950,000 in capital cities and regional centres and $650,000 in other areas. Regional centres for Victoria are Geelong. Both the purchase price and the lender's valuation must sit at or below the applicable cap. The scheme covers established homes, new builds, and off-the-plan purchases, provided you intend to live in the property as your owner-occupied home.

You must be an Australian citizen or permanent resident and meet the first home buyer definition, meaning you have never owned property in Australia. Participating lenders assess your application using their standard serviceability criteria, so your income, employment, and existing debts all factor into whether you are approved and how much you can borrow.

Can you use the 5% Deposit Scheme and still access Victorian stamp duty concessions?

State and territory grants and stamp duty concessions can generally be used alongside both schemes, though restrictions vary by jurisdiction and program. In Victoria, eligible first home buyers receive a full stamp duty exemption on properties valued up to $600,000 and a sliding concession on properties between $600,001 and $750,000. You can combine this concession with the 5% Deposit Scheme as long as you meet the residency and occupancy requirements for both programs.

The Victorian First Home Owner Grant of $10,000 applies only to new homes valued up to $750,000. If you are buying an established property through the scheme, you will not receive the grant, but you can still access the stamp duty concession. You must move into the home within 12 months of settlement and live there for at least 12 continuous months to satisfy the state requirements.

What do lenders look at when you apply with a low or no deposit?

Lenders assess your income, employment stability, existing debts, living expenses, and credit history. APRA requires all ADIs to assess new borrowers' capacity to service a home loan at an interest rate that is at least 3.0 percentage points above the loan product rate. This buffer ensures you can still afford repayments if interest rates rise.

APRA activated a DTI lending limit on 27 November 2025, effective from 1 February 2026, with each ADI permitted to lend up to 20 per cent of new owner-occupier loans to borrowers with a total DTI ratio of six times or greater. If your total borrowing is more than six times your gross annual income, your application may require additional scrutiny or be declined depending on how much lending the lender has already done in that category.

When you apply with no cash deposit using a family guarantee, the lender still assesses your ability to service the full loan amount from your own income. Your guarantor's income is not counted toward your borrowing capacity. The guarantee simply provides the lender with additional security, reducing their risk and allowing them to lend without requiring you to pay lenders mortgage insurance.

How does lenders mortgage insurance affect your loan when you have less than 20% deposit?

LMI applies to residential loans where the LVR exceeds 80 per cent. The premium is a cost borne by the borrower and is calculated on a sliding scale based on the loan amount and LVR. For a $600,000 loan with a 5% deposit and an LVR of 95%, the LMI premium might range from $15,000 to $25,000 depending on the lender and insurer. This cost is usually added to your loan balance rather than paid upfront, though that increases the total amount you owe and the interest you pay over time.

Under the 5% Deposit Scheme or when using a family guarantee, you do not pay LMI because the lender's risk is covered either by the government guarantee or by the additional security from your guarantor. This is one of the primary financial benefits of these structures and can save you tens of thousands of dollars compared to a standard low-deposit loan.

Are there any risks to buying with no deposit?

Buying with no cash deposit means you start with little to no equity in the property. If property values fall or remain flat, you may find yourself in a position where you owe more than the property is worth, particularly in the first few years. This can make it difficult to refinance or sell without bringing additional funds to settlement.

When a family member provides a guarantee, their property is at risk if you default on the loan. While the guarantor is only liable for the portion of the loan secured against their property, a default could still result in the lender taking action against that security. It is important that both you and your guarantor understand the obligations and have a clear plan for removing the guarantee once you have built sufficient equity.

Your borrowing capacity may also be stretched when you purchase at the upper limit of what a lender will approve. Interest rate rises, changes in employment, or unexpected expenses can all make repayments more difficult to manage. Before committing, consider whether you can comfortably service the loan even if your circumstances change.

What happens after you buy?

Once you settle, your focus shifts to building equity as quickly as possible. This can be done by making extra repayments when your budget allows, benefiting from property value growth, or a combination of both. The sooner your loan balance drops below 80% of your property's value, the sooner you can remove a family guarantee or improve your position for future borrowing.

If you used the 5% Deposit Scheme, you are not locked into your original lender. You can refinance once your equity position improves, though you will need to meet the new lender's criteria and may need to pay LMI if your LVR is still above 80% without a guarantee or government support. Refinancing may give you access to a lower rate, better loan features, or the ability to consolidate other debts.

Keeping your offset account funded, maintaining a buffer for unexpected costs, and reviewing your loan structure regularly will help you stay on track. If your circumstances change or you are unsure whether your current loan still suits your situation, speaking with a broker can help you understand your options without obligation.

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