How to Buy Property with Little or No Deposit and Avoid LMI

Saving a 20% deposit feels impossible when rent keeps climbing and property prices jump faster than your savings. But here’s what most people don’t know: you don’t need a 20% deposit to buy property. 

There are legitimate ways to get into the market with a smaller deposit or even nothing saved, without getting hit with expensive Lenders Mortgage Insurance. 

What’s LMI and Why Does It Cost So Much? 

When you borrow more than 80% of a property’s value, banks make you pay for insurance that protects them if you default. You’re paying thousands for something that only benefits the lender. 

What LMI typically costs: 

Most people add it to their loan, so you end up paying interest on it for 30 years. That’s money you could use for your deposit or renovations instead. 

Ways to Buy Without a Big Deposit 

Family Guarantee 

This is the most common way to buy without a full deposit. A close relative, usually your parents, offers their home’s equity as security for your loan. 

Your parents need at least 40% equity in their home. Their property value needs to be double what they’re guaranteeing. The bank uses both properties as security. You can borrow 100% or sometimes 105% of the property value with no LMI. 

Say you want to buy for $500,000. Your parents have a home worth $600,000 with a $200,000 mortgage. They have $400,000 in equity. They could guarantee your loan, and you could borrow the full amount without any deposit. 

Your parents need to understand the risk, though. If you can’t make repayments, they become responsible. They don’t have to sell their home automatically. They could use other funds or borrow against their property. 

Once your loan drops below 80% of your property’s value, they can be released from the guarantee. But they need to request it formally. 

Professional Loans 

Some lenders offer deals to specific professions that let you borrow 90% to 100% without LMI. Why? These jobs have lower default rates and higher earning potential. 

Jobs that usually qualify: 

• Doctors and specialists 

• Dentists and vets 

• Lawyers and accountants 

• Engineers 

• Teachers and nurses at some lenders 

You need permanent employment in your profession and a decent credit history. Some lenders want you in the job for a minimum period. 

Government Schemes 

• First Home Guarantee: Buy with just 5% deposit. The government guarantees the rest up to 20%, so no LMI, only for first home buyers. Property price caps apply. You must live there. 

• Victorian Homebuyer Fund: The Victorian Government puts in up to 25% if you have 5% saved. It’s shared equity, so they own part of your home. When you sell, you pay back their share plus any increase in value. Max price is $950,000 in Melbourne, $700,000 in regional areas. Few lenders participate. 

• First Home Super Saver Scheme: Withdraw up to $50,000 from super for your deposit. Tax benefits help you save faster. 

Most states offer first home buyer grants, too, usually $10,000 to $20,000 or more. 

Other Options 

Some specialist lenders offer 90% to 95% loans without LMI if you’re a first buyer with high income, excellent credit, buying in a low-risk area, and have genuine savings. 

If your parents have cash but don’t want to risk their property, some lenders accept a term deposit as security instead. It stays locked until your loan drops below 80%. 

Things to Know Before You Commit 

Your parents are taking a real risk with a guarantee. If you lose your job and can’t pay, they’re legally responsible. Have honest conversations about worst case scenarios. 

When you borrow 95% to 100%, your property choices matter more. Buy somewhere with strong fundamentals. Don’t gamble on places needing major work or declining areas. 

A 100% loan means bigger monthly repayments. Banks tell you what you can borrow. You figure out what you can actually afford while still living normally. 

You need emergency savings, too. Boiler breaks? Job loss? You can’t just sell immediately. Keep 3 to 6 months of expenses saved separately. 

Getting It Done Right 

If using a family guarantee, talk to your parents properly first. Don’t surprise them when you’ve found a property. Give them time to think and get legal advice. 

Clean up your credit before applying. Pay off cards or reduce limits. Close unused accounts. Stop applying for new credit. 

Get pre-approval before house hunting. It shows your real budget and makes you serious to sellers. 

Not all lenders offer these products. Some are better for guarantees, others for professional loans. A broker knows who to approach. 

Remember, borrowing 100% doesn’t cover stamp duty, legal fees, inspections, moving costs, and initial setup. You still need cash for those. 

Why Get Professional Help 

These loans are complex. Each lender has different rules for guarantees, eligible professions, and government schemes. A good broker knows who to approach for your situation, which banks are flexible, and which lenders provide what they claim to offer. 

They handle the paperwork, too. For guarantor loans, that’s significant. Your parents need legal advice. Documents need specific signing. Timing matters. Do it yourself and you’ll likely miss something. 

Ready to Buy Without a Massive Deposit? 

Thousands of Australians buy property every year through family guarantees, professional loans, and government schemes. The market isn’t waiting for you to save 20%, and rent isn’t getting cheaper. 

Oz Lend has helped Melbourne buyers for over 20 years. We work with family guarantees regularly. We know which lenders offer the best products and we have a comprehensive understanding of all relevant Government schemes. 

We’ll look at your situation, explain what’s possible, and structure a loan that gets you into property without unnecessary risk. Whether you’re a professional, a first home buyer, or have parents willing to help, we’ll find the right approach. 

Book a free consultation and find out how you can buy property without a huge deposit.