Many lenders have changed to stricter policies on loans over 80% of the property value for mortgages over $1 million. This is due to changes made by the lenders mortgage insurers.
The insurers have their own restrictions and will not insure the banks and lenders if you are borrowing over a certain amount. If the banks are not insured for a higher risk loan they will decline the application.
Therefore, in order to be assessed for a loan you will need to be in a strong overall financial situation. This includes your employment and income as well as single or multiple securities.
What are the lending criteria?
When borrowing more than 1 million dollars, both 90% and 95% LVR loans have strict lending criteria. These include:
- Strong employment: ideally the banks prefer that you have spent more than a year in your current job. If you are self-employed, lenders prefer over two years of consistent work in your business.
- Proven genuine savings: you need to have saved or held a minimum of 5% of the purchase price for at least 3 months prior to applying for a loan.
- Good asset position: your debts need to be in very good order and easily serviceable. As little debt as possible is ideal.
- Good credit score: in particular no defaults are permitted and you must not have too many enquiries on your credit file. You can use a Credit score calculator online to find out your score.
- Good quality single security property in a prime location: ideally a house or unit in a capital city. Due to the restrictions of the mortgage insurers you may need to own multiple properties as security.
In order to get approved, you need to find the lenders that will assess your situation more favourably. We specialise in loans over $1,000,000 at 90% and 95% LVR. Please enquire online or contact us on 1300 889 743 and we can help get your mortgage approved!
90% home loans over $1 million
At 90% LVR, $1 million is the maximum most banks are willing to lend. You may be able to borrow above this amount however you need multiple security properties, at least two.
You may be able to borrow a little more for loans of up to $1,500,000 at 90% LVR to cover the cost of the LMI premium. However for anything above this amount up to a maximum of $2,000,000, you are unable to borrow more for lenders mortgage insurance (LMI).
This means that for a 90 percent home loan over $1 million, you will receive approximately 87% of the property value after deducting LMI.
95% home loans over $1 million
Whilst there are a number of lenders willing to lend up to $1 million at 95% LVR, most will only approve up to $700,000 or $800,000.
Although the lenders mortgage insurer restrictions prevent most borrowers having more than $1,000,000, there is one lender that has a special deal with its insurer. For people in an extremely good financial position, they can consider loans up to $1.5 million at 95% LVR.
The major difference when borrowing these sums with a 95 percent home loan is that you cannot borrow the cost of LMI. You must pay for it from the loan itself. Therefore the borrower will receive approximately 91.5% LVR.
Do you have a property in mind? We can help you apply for a $1 million loan at 90% or 95% LVR. Contact us today on 1300 889 743 or enquire online today.
Why are banks conservative for loans over $1 million?
Many lenders are concerned about the market volatility created by the number of first home buyers with no savings history entering the market. This is the primary reason why many lenders have withdrawn 95% loans.
With loans over $1,000,000 it is not just the banks that are conservative, but it is also the mortgage insurers. The risk associated with loans of this size is normally deemed too great unless the borrower’s financial situation is incredible. If the mortgage insurer does not insure the bank against a loan, the bank will not approve the application.
Loan to Value Ratio (LVR)
LVR is the percentage of the property value that you borrow. For example, at 80%LVR you will need a 20% deposit. If you are paying LMI on your loan, some banks and lenders will allow you to borrow a little more to cover the insurance. However, in many cases the LMI will be taken out of the loan amount and you will need a deposit greater than 20%.
The cost of LMI
Lenders mortgage insurance insures the lender, NOT the borrower, against a default on the loan. This lowers their risk for the lender, which is why they are willing to give borrowers loans above 80% LVR with LMI.
For loans over $1 million, LMI becomes extremely expensive. It does not just include the increase in the absolute value of the insurance as the loan size increases, LMI also includes the risk the mortgage insurer places on high LVR loans of that size.
Apply for a loan today!
At Home Loan Experts we have brokers that specialise in loans over $1,000,000. As we work with many different banks and lenders, we know which are willing to assess applications at 90% LVR and 95% LVR.
Contact us today on 1300 889 743 or enquire online and one of our brokers will contact you.