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 because of this, borrowing 95% is 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: Almost all lenders require you to prove that you have saved 5% of the purchase price. However, if you don’t have genuine savings then consider a 95% no savings loan or a 110% guarantor home loan. One of our lenders will accept the rent you have paid over the last 12 months, or a gift from your parents, as genuine savings!
• Minimal debts: People with many credit cards & personal loans are generally not accepted. As a rough guide people who have more than 7% of the purchase price in unsecured debts such as personal loans and credit cards are often not approved.
• 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.

Do you qualify for a loan? Call us on 1300 889 743 or enquire online and one of our mortgage brokers that specialises in 95% home loans will let you know your options.

95% home loans with a 1.00% rate discount!

Did you know that one of our lenders has a special 95% + LMI home loan available for low risk borrowers? You can obtain a lower rate than most people get for an 80% home loan! In addition to this you may also qualify for a discounted LMI premium. See below for the criteria for this offer.

Discounted Interest Rate Criteria:

• One lender currently has a 1.00% discount as a special offer for loans over $500,000 & 0.9% for loans over $250,000 up to $500,000!
• You must be buying a property (refinances are not accepted).
• You have at least 5% in genuine savings (some exceptions for renters).
• You are borrowing no more than 95% of the property value plus LMI.
• You must have been in your job for at least 6 months, with 24 months in the same line of work.
• You have a perfect credit history.
• You are borrowing more than $250,000 and less than $750,000.

Give us a call on 1300 889 743 and we will help you to apply for the home loan with the lowest possible interest rate!

Reduced LMI / Discounted LMI Criteria:

• You are buying a property (refinances are not accepted).
• You have at least 5% genuine savings.
• You are borrowing no more than 95% of the property value plus LMI.
• The main income earner must have been in their job for at least 2 years (The borrower with the lower income must be over 6 months in their job).
• You have a perfect credit history.
• You are borrowing no more than $800,000.
• The property you are buying must be in a capital city of major regional centre.

If you meet these criteria then please call us on 1300 889 743 or enquire online and we’ll see if we can get you either an LMI waiver or a drastically reduced premium, at a fantastic interest rate. There are no exceptions made to the above criteria.

How to get a little bit more than 95%…

There is a little know secret that can help you to borrow more than 95%!

One of our lenders allows you to apply for a credit card with a limit of up to $20,000 along with your 95% home loan. (NB. 5% genuine savings is required to qualify for this product.)

The funds from this credit card can be used at settlement, for costs such as stamp duty, conveyancer fees, etc, just like the funds from the mortgage; however funds to complete will still be required to qualify for the loan. The interest rate is the same as the home loan, however the repayments are 3% of the credit card balance each month. So your income will need to be high for you to make this option viable.

With the credit card and mortgage insurance, this often results in the total loan being over 100% of the purchase price! This is a great option for second home buyers who have 5% in genuine savings, yet do not have the funds to cover the stamp duty and other purchasing costs.

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 a 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 make many applications then this will damage your credit score, which in turn will reduce your chances with other lenders.

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.

However, we know a bank that will approve your loan even if your 5% deposit came from another source, such as a gift from your parents. This means you will not have to provide evidence of genuine savings!

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 3.5% 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 98.5% when the premium is included.

However for many lenders, the loan plus LMI premium cannot exceed 97% of the property value. If you are borrowing over $300,000 then because of the higher premium size the actual amount you receive is actually closer to 94% of the property value. This is not the case for all lenders as some do not have this cap at 97%.

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.

Will my application be credit scored?

Yes, almost all lenders use credit scoring to assess loans at 95% LVR. If your loan fails the credit score of the lender then it is unlikely to be approved. You can use our credit score calculator to find out if this will be a problem for your loan or not.

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.

For low risk borrowers we may even be able to get a lower interest rate!

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.