How can I get a home loan with no deposit and no guarantor?

A 100 per cent LVR home loan automatically implies you pay no deposit, which increases the lender’s risk in letting you borrow the amount. In this scenario, the lender may only consider your loan application favorably if someone - a parent or a friend - can guarantee your loan.

Alternatively, they would need strong reasons to believe you’re unlikely to default on the loan, such as a professional qualification or industry affiliation, or a significantly high income, indicating greater borrowing power. These supporting conditions may even convince a few lenders to set aside issues such as an unsatisfactory credit score or inadequate savings for a deposit, which would generally result in the lender charging LMI.

Suppose a lender approves your application for a 100 per cent LVR (no deposit) home loan, with no guarantor. The terms of such a loan will probably require you to pay more in interest, at least until you repay a portion of the loan.

For instance, the lender may charge you an interest rate of 2-3 per cent above their standard variable interest rate until you repay 20 per cent of the loan. Essentially, lenders need some assurance that you have the ability to repay the loan as per their conditions, particularly considering the exceptional nature of the loan. 

Asking a borrower to pay LMI is the lender’s way of ensuring they can recoup their loss in case the borrower defaults on the loan. To get a 100 per cent LVR home loan with no LMI, especially if you don’t have a guarantor, you’d have to be an accredited professional affiliated with an industry body.

For instance, you could be a surgeon registered to practise in Australia, with a valid Australian Medical Association affiliation. Note that lenders may only offer some professionals up to 95 per cent LVR and charge a higher interest rate. Consider asking a lender about the kind of professional home loans they offer.

If your job doesn’t entitle you to special lending criteria, but you still have a high income, you could try to negotiate the loan terms with the lender. You may get the option to pay off a percentage of the loan in an accelerated manner, which would bring down your liability sooner than your usual repayment schedule.

These accelerated repayments should ideally account for both the principal and the interest, lowering the overall loan balance and giving the lender sufficient reason to lower the interest rate as well. Such an arrangement would mean splitting your mortgage into two or more loans, each of which may require paying additional fees, an added benefit to the lender.