Can I invest in a property without a deposit?

Most property purchases require a deposit. Banks and lenders use this as a way to minimise their risk, should you not be able to make your repayments on the loan. But there are other strategies to secure finance for a property investment.  

Family Pledge or Guarantor Loan

A family pledge or guarantor loan is a way for someone without a substantial deposit to buy property. It involves a primary borrower who applies for the mortgage and a guarantor, often a family member, willing to guarantee part of the loan.

The guarantor can use their home's equity to guarantee part of their family member’s loan.  This reduces the lender's risk, allowing the borrower to secure a mortgage with a lower or even no deposit. Over time, as the borrower builds equity, they may be able to release the guarantor from their obligation.

Using equity as a deposit

If you are already in the property market, you may have the option to use equity as a deposit on an investment property. Equity is the current market value of your propertyless any amount you owe on the property’s loan.

Essentially, this is your property’s current market valueless any money you owe on it, with most lenders offering to fund up to 80% of the equity amount. 

Purchasing an investment property using a SMSF 

You can potentially use your superannuation to invest in property. This is another strategy that may suit people who don’t have a cash deposit saved up.

To purchase a property in super, you need to set up a Self Managed Super Fund (SMSF). The general consensus is that the minimum fund balance you would need is around $200,000.

Note – DPN does not offer SMSF services and recommends you seek advice from a qualified accountant and or registered financial planner.

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