Buying a property below market value (BMV) essentially means that you’re acquiring the property for a low price.

Favourable purchases are ideal for people who don’t have a large deposit. Discover how you can qualify for a home loan.


How much can you borrow?

Some of our lenders have excellent policies that allow you to maximise the amount you can borrow when buying a property below market value.

  • If you have 5% in genuine savings: You can borrow up to 95% of the property value as long as you don’t borrow more than 105% of the purchase price.
  • If you don’t have any savings: You can borrow up to 90% of the property value as long as you don’t borrow more than 105% of the purchase price.
  • Guarantor mortgage: Borrow up to 105% of the property value.
  • Low doc: 60% of the property value (80% is available in some circumstances) as long as you don’t borrow more than 100% of the purchase price.
  • Discounts: Competitive professional package and basic loan discounts are available.

Note: Most lenders are very restrictive in the way they assess home loans for buying a property below market value. Some will lend no more than 80% of the property value while others will use the lesser of the purchase price or valuation in their assessment.

Please call us on 1300 889 743 or enquire online to find out how much you can borrow.


What’s a favourable sale?

If you’re buying a property below market value then this is known by the banks as a “favourable sale”.

A favourable purchase or sale comes in two forms:

  • Parents selling a property to their adult child: If your parents have several investment properties then they may decide to help you get a head start in life by selling you a property below its market value.
  • Buying a property to recover a debt: If someone owes you a significant sum of money then you may reach an agreement where they sell a property they own to you for less than it’s actually worth instead of repaying the debt. This is a common way for people to settle debts in the construction industry.

The banks have special home loan lending policies for buying a property below market value. For example, there may be plenty of “gifted equity” in the property but banks are often hesitant to grant approval for the mortgage.


Do I need a deposit?

The majority of banks will require you to have 5% in genuine savings no matter how much the property value has been discounted.

Despite this, buying a property below market value will accepted by some banks with no savings whatsoever.


The LVR calculation is different

The Loan to Value Ratio (LVR) is the home loan amount divided by the lesser of the purchase price or valuation.

Banks use the LVR to calculate the risk of your mortgage and to work out the maximum amount you can borrow.

With a favourable purchase, the banks with the most progressive lending policies will calculate the LVR using their bank valuation only – they won’t take the purchase price into account.


Why are the banks so conservative?

Australian banks are very wary when it comes to buying a property below market value. The reason is that these favourable purchase arrangements are often made without the intervention of an agent, known as an ‘off the market transaction’.

Banks know that if there’s no real estate agent listed on the contract of sale then there’s a higher risk of fraud and if their valuer makes a mistake then they could make a significant loss.


How do the banks protect themselves?

Because of the nature of buying a property below market value, banks will always order a valuation to confirm the property value and investigate the details of the favourable purchase to ensure that they’re comfortable with the transaction.

Some lenders mortgage insurers used by the banks have policies that make it near impossible for you to borrow over 80% of the property value.

Thankfully, not all lenders and LMI providers have these policies.

If you need help getting your loan approved then please enquire online or call one of our mortgage brokers on 1300 889 743 to discuss your situation.


How much stamp duty will I pay?

The exact method that’s used to calculate stamp duty depends on the state you’re in.

In most states, you’ll be required to arrange a stamp duty valuation from a licensed valuer. You’ll then pay stamp duty based on the valuation, not on the agreed purchase price.

In other words, don’t expect to get away with paying less stamp duty – it’s only the purchase price that has been discounted!


An example purchase

George wants to sell his investment property valued at $500,000 to his son Richard. Instead of selling it at market value, George decides to help Richard by selling it to him for only $400,000.

Richard has no savings so, in most cases, a lender would be unable to give him a home loan.

However, one of our lenders can approve Richard for a loan of up to $420,000 (105% of the purchase price) because he’s not borrowing more than 90% of the market value of the property ($450,000).

Because Richard is borrowing over 80% of the property value, he’d need to pay Lenders Mortgage Insurance.


Buying under market value

When you’re considering buying a property below market and it’s not from your parents, it’s important to do some research before you purchase.

Some sellers need a quick sale for genuine reasons while others may be selling the property where there have been problems with the house.

The most common type of property that has no problems with it, yet is sold below market value, is when a bank is foreclosing on a property.

It’s also advisable to further negotiate. Generally, the seller will be more flexible, especially where a quick sale is imperative.

If you’re looking to buy a property below market value and need a home loan, please call us on 1300 889 743 or enquire online and one of our mortgage brokers can help you to finance your purchase.


Apply for a home loan

We’re the experts in home loans for buying a property below market value!

  • We know which lenders will allow you to borrow 100% of the purchase price.
  • As most of our brokers have worked for the major banks, we understand how they think.
  • Our mortgage brokers can help you formulate your loan application to ensure approval.
  • We offer nationwide service.

Our mortgage brokers are specialists in helping people to borrow 100% of the purchase price of a favourable purchase.

Please enquire online or call 1300 889 743 and one of our mortgage brokers can provide you with several competitive options to choose from.

  • Nolan

    My friend, since he owed me money, is selling me his home for less than the market value- 400k against 320k. Will there be any trouble for me to obtain home loan from the lenders as you’ve also mentioned that it’s possible above.

  • Hi Nolan,

    You would be able to get a home loan however they have special lending policies for buying a property below market value. They would require you to have at least 5% genuine savings of the property value. Also you should have some extra deposit for payment of stamp duty and other associated costs.

  • bamford

    I’m buying a property of a friend at a price lower than market value so can I have the current equity in the property counted so I qualify for a no deposit home loan?

  • Hello bamford,

    The banks will consider that a favourable purchase and they have special home loan lending policies for this. One of these policies can be regarding the “gifted equity” and they may often be hesitant to grant approval for the mortgage even if there’s loads of equity available. However, we may be able to help you with this so please call 1300 889 743 to discuss with an expert mortgage broker today.

  • O’Toole

    Aren’t no genuine savings home loans available or is there no way to borrow 95% without genuine savings?

  • Hi O’Toole,

    Yes, no genuine savings home loans are available and you must meet standard lending criteria involving your employment, credit history, serviceability and proof of your income to qualify. Most lenders may only allow you to borrow up to 90% but one of our lenders can approve a home loan for up to 95% of the purchase price with no genuine savings. Please feel free to contact one of our no genuine saving home loan specialists by calling 1300 889 743 if you want to discuss about this.

  • kim

    Hi, can I use rent as genuine savings if I’m renting with other tenants?

  • Hi kim,
    The lease should be in your name alone or both you and your partner. You may still qualify if you are renting with other people, as long as you can prove a track record of prompt rental payments with your bank account statements and your name is listed on the tenancy agreement.

  • Levi J

    Since getting 80% on a low doc loan is seemingly difficult, when will LMI actually be applicable on a low doc loan? Or does it not have LMI?

  • Hey Levi,
    LMI is applicable on low doc loans but unlike standard full doc home loans, it will be applicable when you’re borrowing more than 60% of the property value.

  • Eckel

    I will be buying a house in Tamworth NSW 2430 from my parents at less than the market value. The pecentage I need to borrow to finance it is 91%. I can prove my income but I only have like 3% genuine savings maybe. Can you get me accepted by a lender?

  • Hi there
    Most banks will need you to have 5% in genuine savings but we can help you find some lenders who may be able to accept your situation. We already have a few lenders in mind so please contact one of our expert favourable purchase specialists by calling 1300 889 743 to discuss in detail.