Can you buy a home with no deposit?

What lenders mean by 95%, and why 98% isn't a 2% deposit

A lender's "95%" is the most it will lend against the property's value. But lenders count mortgage insurance differently. Some include the premium inside the 95%, so your real deposit has to be a little more than 5%. Others let it sit on top.

Bankwest's rate page shows a band up to 98%, "including LMI". That's the loan after the insurance premium is added to a 95% base loan, not a 2% deposit. CommBank's page states its limit plainly: the loan can't be more than 95% of the value. NAB doesn't publish a number, saying the limit depends on your loan, location, credit, income and loan type.

Stamp duty and costs: what turns 5% into more

Your deposit isn't the only money you need. Stamp duty, legal and conveyancing fees, inspections and the lender's own costs come on top, and lenders want to see you can cover them. That's what turns a 5% deposit into a larger amount of savings, and it's why approvals fall over when costs weren't counted.

First home buyers often pay less or no stamp duty. In Queensland, for example, there's no transfer duty on a first home valued at $700,000 or less. Check your state's concession before you work out what you need.

• First home grants and duty by state
• Stamp duty calculator

What mortgage insurance costs on a 5% deposit

On the $700,000 example, a $665,000 loan at 95% would attract a premium of about $30,000 on one lender's first home buyer rate card: 4.51% of the loan. It's indicative, not a quote, and premiums vary a lot between lenders. The premium is usually added to the loan, so you pay interest on it too.

That figure is what the other routes save you. The 5% Deposit Scheme removes it; a family guarantee can, with some lenders; and some lenders waive it for certain professions, usually up to 90% of the value and for medical practitioners up to 95%.

• LMI and profession waivers

When the property, not you, is the problem

Lenders limit high loan-to-value lending on some properties regardless of who's buying: certain postcodes, small or high-density units, and unusual properties. A product can matter too. Bendigo's Flex Home Loan reaches 95% only for owner-occupiers on principal and interest; on investment it stops at 90%, and its Easy Home Loan stops at 80%. Ask before you fall in love with a property.

When waiting a few months beats every route

Sometimes the best move is to keep saving. If a few more months would take you past a genuine savings test, cover the costs you hadn't counted, or move you from 5% to 10%, the wait can save thousands in insurance or open lenders that were closed to you. And if you're close to 20%, the insurance disappears altogether.