How do I qualify?

97% home loans are essentially 95% home loans with the cost of Lenders Mortgage Insurance (LMI) added on top of your mortgage, saving you thousands upfront.

Borrowing 95-97% of the property value requires you to meet strict requirements:

  • Your income must be sufficient: You do need to be earning enough to afford the home loan as well as your other commitments like bills and existing debt without hardship. This is otherwise known as meeting the bank’s ‘serviceability ratio’ requirements.
  • You need a strong employment history: A stable job that you’ve been in for the past 6 to 12 months is a general requirement for 97% home loans although some lenders aren’t as strict with this policy.
  • Your credit history must be clean: Your bills, rent, credit card repayments and other commitments must have been paid on time for at least the last 6 months and your credit file must be clear of black marks.
  • You have little to no debt: Having a lot of debt such as multiple credit cards or personal loans is generally not accepted. Anything less than 5% of the purchase price for the property you’re looking to buy may be accepted on a case by case basis.
  • You must have a sufficient asset position: You should have a level of assets comparable to your age such as a car, shares or a term deposit.
  • There are postcode and property restrictions: The property type and its location will also have an affect on getting approved. Banks are reluctant to approve mortgages for properties that will likely be difficult to sell in the event that you default on your repayments.
  • You need at least 5% genuine savings: You need at least 5% of the purchase price in regular savings into a bank account over a period of 3 months. Luckily, not all lenders have this genuine savings requirement and may accept a gift from your parents instead (conditions apply).

Do you need help getting a 97% home loan?

We’re low deposit specialists who understand high LVR policies.

Call us on 1300 889 743 or complete our free assessment form and one of our mortgage brokers can tell you if you qualify.

How does it work?

There are only a few lenders that offer 95% home loans and even fewer that will allow you go to 97% or higher.

So what is this extra 2% for?

Well, when borrowing more than 80% of the purchase price, the bank will charge a one off charge for mortgage insurance (LMI).

Because loans over 80% are considered to be risky, LMI protects the banks in the event that you default on your mortgage repayments – it doesn’t protect you as the borrower.

Despite this, you still have to pay this premium!

On top of that, you’ll usually have to pay this cost upfront, along with the other usual upfront costs of completing the purchase, including stamp duty, conveyancing fees, legal costs and home loan set up fees.

If you qualify for a 97 percent home loan, you won’t avoid the cost of LMI completely but what the lender will do is “capitalise” or “add” the cost of LMI on top of your home loan.

By doing this:

  • You won’t have to pay this cost upfront.
  • You simply pay the LMI off, at no interest, with your mortgage repayments.
  • You won’t need as big of a deposit to complete the purchase because you’ll be saving thousands upfront (depending on the loan amount).

Do all lenders cover the full amount for LMI?

Generally speaking, LMI works out to be around 2% of the property value, although, depending on the property’s purchase price, it’s usually closer to the 2.5% to 3% mark.

For example, if you wanted to borrow $570,000 for a property in Sydney worth $600,000 (95% LVR home loan), your LMI could be as much as $28,591, which is equal to about 4.77% of the property value.

Now, some lenders will only lend you to borrow 2% of the property value to cover the cost of LMI, which, in this example, works out to be $12,000.

That means you’d still have to cover around $16,591 to complete the property purchase.

Luckily, not all banks have the same policy and will cover the full amount for LMI even if it goes over the 2% mark so you can essentially borrow up to 97.5-98%.

When it comes to 97% home loans, choosing the right lender is essential.

You can get a more accurate estimation of the cost of LMI for your property by using our LMI calculator.

Do I need genuine savings?

When you start borrowing more than 90% of the property value, most lenders require you to have genuine savings equal to 5% of the purchase price.

Genuine savings can be in the form of shares or a term deposit but it most commonly refers to regular deposits in a bank account that you’ve accumulated over a period of at least 3 months.

Showing evidence of a growing bank balance is a reflection of your ability to make regular mortgage repayments.

What if your deposit came completely or partially from a personal loan, a First Home Owner Grant (FHOG) or a non-refundable gift from your parents?

Most lenders won’t accept this as genuine savings but we may be able to help you qualify with a non genuine savings lender!

Our mortgage brokers understand how tough it is to save a deposit in today’s rising property market, particularly if you’re a first home buyer and you’re currently renting.

Stop spinning your wheels and give us a call on 1300 889 743 or fill in our free assessment form today.

Can I borrow more than 97%?

There are lenders who will cover you for more than 97% of the property value depending on the cost of LMI but did you know that you may be able to borrow even more?

In fact, you may be able to borrow up to 105% of the purchase price, which is the value of the property plus the extra costs of completing the purchase.

You can also avoid LMI altogether!

By asking your parents and a close relative to secure your mortgage with their property, you can get into the market sooner with no deposit!

This guarantor loan arrangement requires you and your parents to meet certain criteria.

Please complete our free assessment form and we can let you know if you qualify.

Will I pay a higher interest rate?

Generally speaking, you may be looking at a slightly higher interest rate when borrowing more than 90% of the purchase price but it’s usually very small.

The reason for this is that your LVR is considered to be a high risk.

Despite this, we regularly find that we’re in a position to get you the same interest rate as someone borrowing less than 90% depending on the lender and the strength of your situation.

Why is it important to compare LMI rates?

When most Australians are looking to get a home loan, they focus most of their attention on getting a cheap interest rate.

Rarely do they consider the LMI premium rates of the lender that they’re going with.

Overlooking LMI rates can be a costly mistake but you can be forgiven for overlooking them.

That’s because banks don’t advertise these rates to the public!

LMI rates increase quite rapidly once you start borrowing at the 90%, 95% and 97% mark and the lender may even charge a premium loading depending the risks they identify in your application.

For example, self-employed borrowers can be charged a 10% LMI premium loading while no genuine savings applicants can be charged as much as 30%.

Lender choice is the key.

Speak to a mortgage broker today

Our mortgage brokers are low deposit home loan specialists, many of them with a number of years of experience working in the credit departments of major banks and lenders.

They understand 97 percent home loan policy and have a range of lenders to choose from to get you the right low deposit solution for your needs.

High LVR home loans come with strict lending requirements so call us on 1300 889 743 or complete our free assessment form to discover if you’re eligible for a 97% home loan.

  • R.R.

    I guess it’s a trade-off then – you avoid having to wait to save a bigger deposit but can buy immediately although you’ll have to pay more in interest since the LMI gets capitalised.

  • Hello R.R.

    Yes, that is a compromise you’ll have to make to avoid potentially missing out an an opportunity of a lifetime. However, if that doesn’t seem like a good idea then you can opt for no deposit home loan options:

  • shellshear

    Can I get help finding some LMI rates on different LVRs and amounts?

  • Hey shellshear,

    You can check out our LMI premium rates table to find the LMI premium rates offered by one of our lenders for both full doc (normal loans) and low doc loans. Here’s the link to the LMI rates page:

  • holly

    Won’t it be quicker and easier if I just go for the lender with the cheapest home loan interest rate?

  • Hey holly,

    It can be quicker but overlooking LMI rates can be costly especially when considering the fact that the banks don’t advertise these rates to the public. LMI rates increase quite rapidly once you start borrowing at the 90%, 95% and 97% mark and the lender may even charge a premium loading depending on what type of borrower you are. For example, self-employed borrowers can be charged a 10% LMI premium loading while no genuine savings applicants can be charged as much as 30%.

  • booth

    Hi, what property title types are acceptable to banks?

  • Hi booth, please check out the acceptable title types and their explanations as well as extra info here:

  • Tam

    Who shouldn’t apply for a professional package home loan?

  • Hey Tam,
    A professional package may not be the best choice for you if you’re borrowing less than $250,000, you don’t need a range of bank products and/or you don’t want to switch to a new bank.

  • Electra

    Hi, I’m planning to buy a brand new property in Toowoomba for around $550,000. I don’t have any deposit but since I’m a first home buyer, I’m entitled for a grant of $20,000 and this will be my only contribution. Can I get a home loan?

  • Hi Electra,
    The First Home Owners grant (FHOG) could be used as your contribution towards the additional money that you require to settle on the property. However, you need to have at least 5% of the property price as genuine savings, i.e. regular savings into a bank account over a period of 3 months. Luckily, not all lenders require genuine savings and may accept a gift or a guarantee from your parents

  • SM

    Hi, I have purchased land back in July 2017 with an assurance from my broker that I will be able to borrow 97% with 2 possible lenders to enable the build, as I had to wait so long for council approval it appears that the 97% lend was no longer available with either lenders, so now I have a piece of land with planning, I am first time buyer and do am entitled to first grant, I purchased land for 220 and owe 201, with LMI .
    Build is 350-355 , I have 5 k savings so a further 20k (including grant) , fo you think anything can be done as I am at the end of my tether

  • Hi Sean,
    This situation can be quite a challenge. Lenders have made many policy changes in the last 6 months and you are right some have stopped offering 97% loans and instead offer 95% loans. Unfortunately they are allowed to do this and have no responsibility to anyone who has been caught out as a result.
    We can refinance to another lender who offers 97% however you’d pay another LMI premium on the land loan and this means you wouldn’t actually be better off.
    So the best courses of action are:
    – Borrow 95% inc LMI with your current lender, this would require saving more funds
    – Refinance with a guarantor loan (no LMI payable)

  • Rory Sommerville

    We have a small deposit. About 10K. We both work. Been in the same jobs for over 10 years. Been renting in the same property for 10 years. What are our options?

  • Hi Rory,
    Thanks for getting in touch.
    Your employment stability and rental history will certainly help your home loan application. If you have a small deposit, there are still some mortgage options available to you.
    The first option is to ask your parents if they can act as a guarantor on your home loan. They must own property in Australia and have enough available equity to provide a guarantee. The second option is to ask your parents to gift you the money for the deposit.
    To be clear, this gift must be non-refundable and they must sign a gifted deposit letter that stipulates this. This is known as a non genuine savings solution because you haven’t saved the deposit yourself with regular contributions to a savings account.
    However, some lenders will accept your rental history in lieu of genuine savings because it’s a good sign that you will be able to make regular mortgage repayments without financial hardship or defaulting on your home loan.
    The other option is to continue saving to build a larger deposit and reconsider the maximum you’re willing or able to spend to buy a property.