How big of a deposit do I need?
As a general rule, first home buyers will need to contribute around 5% to 10% of the purchase price as a deposit.
The actual amount varies depending on the various first home owners grants and stamp duty concessions available in each state.
Interestingly, from January 2020 eligible first home buyers with a 5 per cent deposit will be able to get the LMI waived under the First Home Loan Deposit Scheme.
Second home buyers and investors will usually need a 10% deposit, half of which will cover the deposit on the property and the other half 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.
You can buy a home with no deposit if your parents guarantee your loan.
The secret to borrowing a little bit more than 95%…
This option is only viable for people with a high income.
One of our lenders allows you to apply for an additional loan facility with a limit of up to $20,000 along with your 95% home loan!
The funds from this additional loan can be used at settlement for costs such as stamp duty and conveyancing fees just like the funds from the home loan.
The catch is that you must have 5% of the purchase price saved in a bank account to pay your deposit and qualify for the home loan.
The interest rate is the same as the home loan, however you are required to pay off the loan quickly so the repayments are relatively high.
With the additional loan and capitalised mortgage insurance, the total loan is often over 100% of the purchase price!
This is a great option for second home buyers who have 5% in genuine savings, yet don’t have the funds to cover the stamp duty and other purchasing costs.
Not all lenders offer 95% loans
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 Insurance (LMI).
LMI providers have their own lending guidelines that are stricter than those used by the banks so it’s harder to get approved.
In addition to this, lenders only have so much money to lend out. They want to maximise their profit while keeping risks under control. 95% home loans are a high risk so most of their available funds are allocated to less risky loans.
In short, lenders pick and choose who they approve for 95% loans.
Are you eligible for a 95% loan?
Call us on 1300 889 743 or complete our free assessment form to find out!
Can I borrow more than $1,000,000?
Did you know that most lenders will only approve a 95% mortgage up to $700,000 or $800,000?
Some less conservative lenders will allow you to borrow up to $1,000,000.
However, the lender’s mortgage insurers have restrictions which will stop you from borrowing over $1,000,000.
One of our lenders has a special agreement with their insurer and can consider a 95% loan up to $2,500,000 for people who are in an exceptionally strong financial position.
For loans up to $1,000,000, LMI can usually be capitalised (added to the loan amount). Anything above that can’t be capitalised so, in effect, you’re borrowing approximately 91.5% after your LMI premium has been deducted from the loan.
How much is LMI?
LMI is relatively costly for 95% loans.
The cost of LMI varies according to:
- Mortgage insurer: there are only a handful of mortgage insurers in Australia and they all have slightly different premiums
- The loan amount: LMI is calculated on a tiered scale, the higher the loan amount, the higher the premium
- The deposit amount: the lower the deposit, the greater the LMI
- Type of savings: an applicant that contributes genuine savings (or has a satisfactory 6-month rental history) will incur a lower LMI premium than an applicant who has non-genuine savings
You can use our Lenders Mortgage Insurance Calculator to get an estimation of how much you could save by avoiding mortgage insurance.
Are there any LMI discounts or LMI waivers?
- Discounted LMI premiums: A few lenders are starting to offer first home buyers a discount on their LMI premium.
- Insurance duty for NSW purchase: An LMI policy over the property in NSW is exempt from insurance duty provided that the premium for that policy was paid on or after 1st July 2017.
- Certain professions: Medical professionals, Accountants, Legal professionals, Professional Athletes may all qualify for the No LMI loans when borrowing up to 90% of the property purchase price.
- 15% Deposit No LMI: If a single or couple’s combined taxable income is around $180,000, you may qualify for a no LMI loan if you have a deposit of at least 15% saved.
- Guarantor loans: By using your parent’s property to cover the 20% deposit, you may be able to borrow 100% of the property purchase price + associated property costs and avoid paying any LMI.
Please call us on 1300 889 743 or complete our free online assessment form and we’ll provide a tailed solution for you.
Interest Rate Discounts
Get a 1.40% rate discount!
Did you know that one of our lenders has a special 95% plus LMI home loan available for low risk borrowers?
- One lender currently has a 1.40% discount as a special offer for loans over $500,000, and 1.30% 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 are made for renters).
- You’re 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’ve got a perfect credit history.
- You’re borrowing more than $250,000 and less than $1,000,000.
Give us a call on 1300 889 743 or fill in our free assessment form and we’ll help you to apply for a home loan with the lowest possible interest rate!
How can I avoid being overcharged?
When the banks seek funding on the international money markets, they pay a higher interest rate if their home loans tend to be a high percentage of the property value.
As a result of this, banks try to balance their home loan portfolio by charging a higher interest rate for 95% home loans.
Not every lender has this same approach! Some lenders have pricing that’s just based on the loan size.
By applying with one of these lenders you can get a fantastic interest rate.
The key is to know which banks are pricing aggressively to get more market share! As a mortgage broker, this is where we can help you to shop around and choose the best home loan.
Which lenders are the 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, this will damage your credit score, which in turn will reduce your chances with other lenders. So don’t just apply with several lenders to see who approves your loan.
If you’d like to know which bank or lender is most suitable for your 95/5 loan then please call us on 1300 889 743 or fill in our free assessment form.
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’s unlikely to be approved.
Use our Credit Score Calculator to find out if this will be a problem for your loan or not.
Are non-bank lenders better for 95% loans?
The major lenders tend to be very conservative with their lending policies for 95% home loans. The main reason that we choose a non-bank lender for our 95% borrowers is because they can’t get approved by a bank.
There isn’t normally a large difference in the interest rates offered by banks as opposed to non-bank lenders.
In fact, a lender of ours will occasionally come out with a special offer that’s way ahead of the competition!
Which loan features are available?
All standard loan features are available, including:
- 100% offset
- Fixed interest rates
- Basic loans
- Professional packages
- Line of credits aren’t normally available
- Restrictions apply to interest only loans
Talk to an expert mortgage broker
Here at Home Loan Experts, we have mortgage brokers that specialise in 95% home loans.
Please fill in our free assessment form or call us on 1300 889 743 to discuss your situation with an expert to land the right home loan for you.