If you are looking to borrow over 80% loan to value ratio (LVR) up to 95% on a property with a value exceeding $1 million, then you need to be aware of some changes in lender policy!
There’s updated information available on our website specifically for people looking to borrow over $1 million with either a 90% LVR or 95% LVR home loan.
What are the lending criteria for borrowing up to 95%?
The criteria for borrowing over 80% LVR for property values above $1m are very strict.
This is because the loan to value ratio is high and it has been shown statistically that loans over 80% LVR, regardless of the loan amount, are more likely to go into arrears than loans with a smaller LVR.
The requirements for these loans are:
- Strong employment. Ideally more than a year in your job or two years in your business if you are self employed.
- Genuine savings must be proven. Genuine savings must be minimum of 5% of the purchase price.
- Good asset position.
- Good credit score. In particular no defaults are permitted and you must not have too many enquiries on your credit file.
- Good quality security property in a prime location. Ideally this must be a house or a unit in a capital city.
Our mortgage brokers are in the top-tier with the lenders that can get you a 95% LVR home loan on property exceeding the value of $1 million.
Call us on 1300 889 743 or enquire online today for an assessment of your situation.
Can I borrow the cost of lenders mortgage insurance (LMI)?
- For 90% LVR home loans over $1 million, it is possible to borrow the cost of lenders mortgage insurance (LMI) for loans of up to $1.5 million.
- For 90% LVR home loans between $1.5 million and $2 million you cannot borrow the cost of LMI, so in effect you are able to borrow 87% of the property value.
- For 95% LVR home loans over $1 million up to $1.5 million you cannot borrow the cost of LMI. You must pay for it from the loan proceeds so in effect you are able to borrow 91.5% of the property value.
- Larger loans are available at up to 80% LVR depending on the strength of your situation.
- Almost half of all Australian home buyers surveyed make more than the minimum mortgage repayments,
- Strong house price growth provides an incentive for investors, but creates a barrier for First Home Buyers (FHBs),
- In order to own property, Australians are becoming increasingly indebted.
- Almost half of all Canadian respondents were positive about the outlook for the economy and housing market,
- Canadian respondents are generally comfortable with higher levels of debt,
- Government supports the availability of credit through its operation of the Canada Mortgage Bonds (CMB) program and other government backed securitisation vehicles.
- Indian home buyers are generally upbeat about the economy and their personal finances,
- However, there are some concerns about high house prices in Tier one cities after rapid growth in the last 18 to 24 months
- As a result, few are looking to buy property in these larger cities as they feel financially squeezed out, and demand may well shift to Tier two cities
- Moving forward, a combination of mortgage insurance and product innovation could help new home buyers get into the market sooner.
- The Irish Government has introduced austerity measures for the next four years in order to control
spiralling debt, - Irish respondents had a generally negative perspective on the economy and their personal finances, with government measures a clear factor,
- FHBs are making up an increased share of the mortgage market, following improved affordability.
- Home buyer confidence in Italy remains weak, as 55% of Italians surveyed felt negative about their national economy and 46% said they were concerned about their personal financial situation,
- Housing affordability has improved in the last year due to lower house prices and interest rates,
- However, two thirds of those surveyed who would ideally like to buy property now are not in the financial position to do so.
- Mexicans who took part in the survey are relatively positive about the economy and their personal finances,
- Those who are struggling are worried about unemployment/underemployment, which is impacting on property market participation,
- Housing shortages have resulted in a fall in affordability, with the average age of a FHB over the last decade rising to 33 years,
- Very few Mexican respondents have had trouble meeting mortgage repayments, but their outlook is pessimistic.
- UK home buyers interviewed are pessimistic over the economy and their personal financial situation,
- Despite being more optimistic than average in regards to the property market, UK respondents will not actively enter the market in the next 12 months,
- FHB respondents in the UK are increasingly being priced out of the market,
- Eight in ten UK respondents expected no difficulty meeting their repayments over the coming year.
- More than half of Americans surveyed are nervous about how the economy will perform in the coming year,
- Nearly two in three feel that now is a good time to buy a home,
- Two thirds of American respondents feel that mortgage insurance helps them buy a home with a smaller down payment, and sooner,
- The average age at which a borrower is able to purchase their first home has increased from 27.3 years during the 1970s to 31.6 years in the 2000s.
Why are the banks so conservative for loans over $1 million?
Loans over $1 million are highly risky, and as such, borrowing over 80% LVR is not allowed by mortgage insurers. Since lenders cannot get insurance cover on these loans, they cannot approve them.
There is a high risk to the lender on a loan over 80% LVR on high value property if the loan were to default.
One of the reasons that mortgage insurers do not cover these loan types is that properties worth over $1 million tend to have larger price fluctuations than lower priced properties.
Why is the LMI so expensive for loans over $1 million?
The cost of LMI is expensive for loans over $1 million because this is an area of high risk. Property over $1 million in value will not sell as quickly.
If you take out a loan of 95% on a property with a value exceeding $1 million then if you ever get into trouble with your debt, the lender will not be able to find a buyer for the home quickly.
The sale-ability of expensive property is low for the obvious reason that very few people can afford expensive housing.
Why use a mortgage broker?
Mortgage brokers who bring high quality business to banks and lenders are eligible for special deals to pass on to their customers.
Buyers acting alone often do not see or hear about any of these special deals. This is why it’s essential to have a good mortgage broker on your side.
Our mortgage brokers are in the top-tier with the lenders that can get you the 95% LVR home loan on your property purchase of $1 million – even up to $2 million.
Call us on 1300 889 743 or enquire online today and we will go over your options to find the best loan to suit your needs!
A major mortgage insurer, Genworth, have recently suggested a mandatory mortgage fact sheet for home buyers.
This is a great idea for borrowers to be educated about LMI (Lenders Mortgage Insurance) as many do not know what it is or if it would apply to their loan. It does not protect them as a borrower, yet many borrowers believe that it does.
The key to this fact sheet is that it must be kept simple as the usage of LMI varies between different lenders and insurers, it should inform customers without confusing them.
One thing the fact sheet could mention is that some lenders have significantly cheaper LMI than others, however this fact is unlikely to be supported by the banks.
To many LMI is seen to be an unnecessary cost, but for those Australians who find it difficult to save enough for a deposit LMI can help them having a chance to taking ownership of a home.
A general rule is that LMI is applied to loans above 80% of the property value with a normal home loan, and above 60% of the property value with a low doc loan.
You can learn more on our Lenders Mortgage Insurance page or get an LMI quote using our calculator.
Below is the article from Australian Broker News.
“Mortgage insurer Genworth said a new mandatory one-page mortgage fact sheet for home buyers that will contain details on Lenders Mortgage Insurance will enable them to better compare “apples with apples”.
Announced on the weekend as part of the Federal Government’s bank competition reform package, the new fact LMI sheet will allow consumers to compare quotes side-by-side, including the difference in premiums and rebate schedules.
Treasury has advised against the introduction of a scheme to allow the transfer of LMI between lenders, citing the expense, the extreme complexity of administration, and the conclusion it would benefit only 1% of all borrowers.
Genworth said in a statement the mandatory fact sheet could be similar to the Government’s Key Fact Sheet for home loans, and could be handed out by lenders just prior to borrowers signing their home loan contract.
The insurer said it would benefit borrowers to be aware of the reason for lenders requiring LMI, how LMI reduces the interest rate borrowers with a smaller deposits have to pay, the frequent capitalisation of LMI into the loan, and the availability and structure of refunds.
“Genworth believes it is important that homebuyers know how Lenders Mortgage Insurance works and the benefits it offers, plus their potential rights in relation to existing refund schedules if they switch home loans,” Genworth CEO Ellie Comerford said.”
Source Australian Broker News 22/08/11
Genworth Financial, a leading provider of Lenders Mortgage Insurance both in Australia and abroad, has released their inaugural International Mortgage Trends Report. The report compares the mortgage industry and property market of Australia, Canada, India, Ireland, Italy, Mexico, the United Kingdom (UK) and the United States (US).
So how do home loans in Australia compare to those in the rest of the world?
Australia
Canada
India
Ireland
Italy
Mexico
UK
USA
As you can see there is a common trend of first home buyers becoming older across the world, and affordability becoming a major issue in countries that were largely unaffected by the GFC. There are other common trends of regulation restricting access to mortgages for many borrowers, which in some countries is necessary whereas in other countries may further decrease the ability of First Home Buyers to enter the property market.
You can read the report in its entirety on Genworth Financials website.
Source: Genworth Financial – International Mortgage Trends Report.
