No Deposit Home Loans vs Rent-to-Own in NSW and QLD

Can you get a no deposit home loan in NSW or Queensland?

Not as a standard home loan. Lenders generally want a deposit of at least 5%, and a deposit under 20% usually means paying Lenders Mortgage Insurance (LMI) unless a government scheme covers it. Loans advertised as no deposit home loans usually lend you the deposit as a second loan, at a higher interest rate.

Moneysmart says some lenders may accept a deposit as little as 5%, and that LMI is a one-off fee that protects the lender, not you. So the real choice is to borrow the deposit, use a government scheme to shrink it, or build it another way. One other way is 0% deposit Rent-to-Own homes, where you rent a home you'd love to buy and build your deposit while you live there.

What no deposit and low deposit home loans are there?

There are three kinds: a deposit loan that lends you the whole deposit, government schemes that cut the deposit to 5% or 2%, and a standard 5% deposit loan with LMI. Only the first needs no deposit of your own. Rent-to-Own is in the table for comparison, though it isn't a loan.

A deposit loan: borrowing the deposit

A deposit loan is a second loan that covers some or all of your 20% deposit, alongside a standard 80% home loan. You buy now and own the home from settlement, but you repay two loans, and the deposit loan usually carries a higher interest rate than a standard mortgage. Ask for the rate, comparison rate, fees and term in writing before you apply.

Government schemes that cut the deposit

The Australian Government 5% Deposit Scheme guarantees part of your loan so you can buy with 5% and no LMI. It doesn't lend you money or pay your deposit. The home must sit under a price cap: $1,500,000 in Sydney and the NSW regional centres, and $1,000,000 in Brisbane, the Gold Coast and the Sunshine Coast. Elsewhere the caps are $800,000 in NSW and $700,000 in Queensland. See 5% Deposit Scheme vs Rent-to-Own.

Help to Buy is a shared equity scheme. You put in at least 2%, and the government contributes up to 30% of the price of an existing home or 40% of a new one, owning a big chunk of your house. Its price caps are $1,300,000 in Sydney and the NSW regional centres and $1,000,000 in Brisbane, the Gold Coast and the Sunshine Coast, or $800,000 and $700,000 in the rest of each state. We cover it in Help to Buy vs Rent-to-Own.

Queensland adds two of its own. Boost to Buy is the state's shared equity scheme: a 2% deposit, with the Queensland Government taking up to 30% of a new home or 25% of an existing one. When we checked, Queensland Treasury said the South East Queensland places in its second round had all been allocated. The Queensland Housing Finance Loan is a government loan with a deposit from 2% and no LMI. The amount you can borrow depends on your income, so you may need a larger deposit.

In New South Wales, the state's Shared Equity Home Buyer Helper pilot closed on 30 June 2024, so the two Australian Government schemes are the main options.

A 5% deposit with LMI

Outside the schemes, many lenders will lend up to 95% of the price if you pay LMI. On a $750,000 home, LMI with a 5% deposit is roughly $32,000. It's usually added to your loan, so you pay interest on it.

How much cash do you need upfront for each option?

On a $750,000 established home, a first home buyer using a deposit loan needs about $13,925 in Queensland, or about $3,000 in New South Wales, plus any lender fee. The government schemes need about $18,000 to $51,425. PublicSquare Rent-to-Own needs about $4,715 in either state.

The Queensland Housing Finance Loan isn't in the table because the amount it lends depends on your income, so the deposit you need can be more than 2%.

What does each option cost every week?

On the same home, Rent-to-Own costs $1,059.62 a week, and $325 of that is credited to you as your deposit when you buy. Repayments under the government schemes range from about $728 a week with Help to Buy to about $1,018 with the 5% Deposit Scheme, plus the costs of owning the home.

A deposit loan's rate varies by lender. In our OwnHome vs PublicSquare comparison, the two loans together came to about $1,266 to $1,366 a week on this home.

If interest rates rise, loan repayments rise with them. With Rent-to-Own you have no loan until you buy. Your rent can rise by no more than 4% a year, and your deposit contributions never change.

How do no deposit home loans and Rent-to-Own compare side by side?

A no deposit home loan gets you a mortgage now, with the deposit borrowed. Rent-to-Own gets you into the home now and gives you four to eight years to build a deposit before you need a mortgage. The table sets out the differences that usually decide it.

How does PublicSquare Rent-to-Own work without a deposit?

You rent a home you'd love to buy and build your deposit while you live there. You find a home listed for rent and ask the owner, through their property manager, to rent it to you on a Rent-to-Own basis. Once the owner is interested, PublicSquare acts for you as your buyer's agent.

• Each week you pay the listed rent plus deposit contributions of 50% of your first-year rent. The contributions never change, and they're credited to you as your deposit when you buy.
• On the example home, $325 a week builds $67,600 by the end of year 4 and $101,400 by the end of year 6 toward your deposit goal.
• Your rent is reviewed once a year, and increases are capped at 4% or the legal maximum, whichever is lower.
• In years 4 to 8 you switch to a mortgage with the lender of your choice. The price is the higher of the contracted minimum price or an independent valuation. The minimum grows by 8% a year if you buy in year 4, stepping down to 4% a year in year 8. These rates are for houses; apartments may have lower minimum growth rates in the Contract.
• The owner pays the rates, building insurance and maintenance until you buy.

To be pre-approved you need savings of at least $5,000 and household income of at least the minimum for the area you want to live in. There's no age limit, and your credit history doesn't rule you out: pre-approval is a few questions online and does not affect your credit history. You will need a lender to approve a mortgage when you buy, and PublicSquare doesn't arrange mortgages.

The program runs in Queensland and New South Wales. For every step, read How Rent-to-Own Works in Australia, or see your own figures in the Deposit Builder calculator.

Which suits you: a no deposit home loan or Rent-to-Own?

A loan suits you if a lender will approve you today and you can afford the repayments and the costs of owning. Rent-to-Own suits you if you could service a mortgage later but don't have, or don't want to pay, the upfront costs now.

A deposit loan may suit you if

• a lender would approve you today, and you can comfortably afford repayments on two loans plus rates, insurance and maintenance;
• you have savings for transfer duty and buying costs;
• you want to own now and keep any growth in value from settlement.

A government scheme may suit you if

• you have 2% to 5% saved, plus transfer duty and buying costs;
• you meet the scheme's rules, such as first home buyer status, citizenship or residency, and any income limit;
• the home you want is under the price cap for its location, and a lender will approve you today.

PublicSquare Rent-to-Own may suit you if

• you don't want to borrow your deposit, or don't have the cash for a deposit and transfer duty;
• you want the owner to pay the rates, insurance and maintenance while you build a deposit;
• you want up to eight years in one home, with rent rises capped at 4% a year;
• you plan to stay four years or more and can see a path to a mortgage in years 4 to 8.

When isn't Rent-to-Own the right choice?

Rent-to-Own is usually the wrong fit if you can buy today with a government scheme, because buying now usually costs less over time. It is also the wrong fit if any of these apply:

• You may move within four years. The option to buy opens in year 4.
• You can't see a path to a mortgage. A lender will need to approve you when you buy, and no lender's decision is certain.
• You want the lowest weekly cost. You pay the rent plus your deposit contributions and our fee instalment, which is more than renting the same home.
• You expect prices to fall. You can't pay less than the contracted minimum price, so if the market grows more slowly than your minimum you would pay above market value.

Your contributions are paid to the owner each week and are not held in trust. Is Rent-to-Own Safe in NSW and Queensland? covers the risks in full, and How to Buy a Home With No Deposit in Australia covers every route, including a 10% deposit.

Written by

Jarrod Wills

Buyer's Agent

Licensed agent · Former mortgage broker

Over 10 years’ experience as a mortgage broker and real estate agent, now a licensed buyer’s agent with PublicSquare since 2021. He has worked on 100+ property transactions and knows the Queensland and New South Wales markets and the Rent-to-Own model well.

Reviewed by

Dean Arnold

Founder & CEO

Licensed real estate agent

I started PublicSquare in 2021 to give homebuyers a real path to ownership without a deposit, and landlords a stronger-cashflow alternative to a standard rental. I hold real estate licences in Queensland and New South Wales and personally review every property that enters the program.

Read more about Rent-to-Own.

This article is general information only and does not take your personal circumstances into account. PublicSquare is a licensed real estate agency, not a financial adviser or credit provider. Consider seeking independent advice before making a decision.