95 percent home loan

95% Home Loans

No deposit home loans are no longer available in Australia. However a range of lenders still offer loans for 95% of the purchase price, otherwise known as a 95% Loan to Valuation Ratio (LVR) loan. Borrowing a high percentage of the purchase price isn’t easy, lenders are far more conservative when assessing your loan application.

So how do you get approved for a 95% loan? And which lender has the cheapest rates and fees? Read on to find out…

Who can borrow 95%?

Australian lenders consider all loans over 80% of the purchase price to be a high risk. Because of this they insure these loans with Lenders Mortgage Insurers (LMI). The LMI providers have their own lending guidelines that are stricter than those used by the banks, and so because of this borrowing 95% relatively difficult compared to other home loans.

What types of borrowers are the banks looking for?

• Clear credit history: This means that your credit file has no blemishes whatsoever and that you have paid all of your bills such as rent, credit cards, personal loans and other debts on time every time for the last 6 months.
• Stable employment: In most cases you must have been in your current job for 6 to 12 months. Sometimes an exception can be made to this policy.
• A good income: Lenders are more conservative when assessing your ability to repay a 95% loan. For this reason your “serviceability ratio” must be outstanding.
• Reasonable asset position: Lenders want to see that you have a good asset position relative to your age & income.
• Genuine savings: This is the one that catches most people out. Almost all lenders require you to prove that you have saved 5% of the purchase price. If you don’t have genuine savings then consider a 95% no savings loan (difficult to qualify for) or a 110% guarantor home loan.
• Minimal debts: People with many credit cards & personal loans are generally not accepted.
• Location / property type: Many lenders may be hesitant to approve loans for properties in smaller towns, high rise units in the CBD or other unusual properties.

If you don’t fit the box then please enquire online and one of our mortgage brokers that specialises in 95% home loans will let you know your options.

Not all lenders offer 95% loans

Lenders only have so much funds to lend out, they want to maximise their profit while keep risks under control. And because 95% home loan is very high risk, most of their available funds are allocated to less risky loans.

In short, lenders don’t have much money to lend at 95%, hence they only accept low risk borrowers!

Which lenders are most competitive?

We usually work out which lenders can approve your home loan, then work out what the best loans on offer from those lenders are. There is no point shopping around for the best interest rate only to get your loan declined by the lender you choose!

If you would like to know which bank or other lender is most suitable for your 95/5 loan then please enquire online.

How big of a deposit do I need?

As a general rule first home buyers will need around a 5% deposit that has been genuinely saved just to get their loan approved. The amount they actually need to contribute towards the purchase is usually slightly lower and varies depending on the various first home owners grants and other concessions available in your state.

Second home buyers and investors will usually need a 10% deposit of which 5% will cover the deposit on the property and the other 5% will cover stamp duty, conveyancing fees and other minor costs. These figures are a rough guide only, please refer to your mortgage broker or conveyancer for exact figures.

How much is the Lenders Mortgage Insurance (LMI)?

Lenders Mortgage Insurance is relatively expensive for 95% loans and can vary from 1.5% of the loan amount up to around 3% depending on the size of your loan and the lender you choose. Some lenders will allow you to capitalise your LMI premium on top of your loan, so you may actually borrow as much as 97% when the premium is included. The loan plus LMI premium cannot exceed 97% of the property value. We have created a Lenders Mortgage Insurance Calculator which you can use to estimate the LMI Premium you would pay with a range of lenders & insurers.

Is the interest rate higher for a 95% loan?

No, although there are some exceptions, the vast majority of lenders will not charge a higher interest rate for 95% LVR loans. The same professional package and basic loan discounts are available. The exception to this is if you do not have any genuine savings in which case the rate will be slightly higher than normal.

Talk to an expert mortgage broker

Here at the Home Loan Experts we have mortgage brokers that specialise in 95% home loans. Please enquire online to discuss your situation with an expert.