95% Home Loans
Plenty of lenders will let you borrow 95% of a property's value. Here's how it works.
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You don't need a 20% deposit to buy a home. Many lenders will finance up to 95% of your purchase.
These home loans are usually a little harder to get, because lenders view you as higher risk. You also need to factor in lenders mortgage insurance (LMI) which can add to your costs.
Compare a wide range of home loans with 95% LVRs
How is a 95% mortgage different to other home loans?
Most home loans require a 20% deposit (80% maximum loan-to-value ratio). But some products have a maximum insured loan-to-value ratio of 90 or even 95%. This means you can forget the 20% deposit and buy your property with a smaller deposit.
There are few differences between an 80% mortgage and a 95% mortgage. It could be virtually the same product, even with the same interest rate.
So what's the catch?
But there are two key differences:
- Lenders mortgage insurance. If your deposit is under 20% lenders require you to pay an insurance premium which gives them added protection. Depending on your deposit size and property value LMI can add thousands of dollars to your mortgage. Use insurer Genworth's LMI calculator to estimate your premium.
- Stricter lending criteria. A lender will scrutinise your application more closely if your deposit is under 20%. You need to make sure all your mortgage documents and paperwork are in order to maximise your chance of success.
How do I apply for a 95% mortgage?
Lenders have tightened their lending standards recently, and borrowers with smaller deposits have had a tougher time getting approved.
Strengthen your application by:
- Getting your bank statements, identification and other documents together.
- Demonstrating that you have a long history of savings.
- Checking your credit score before applying.
- Reducing your spending as much as possible in the six months leading up to your application.
Using the table above you can sort through loans with 95% LVRs and read reviews of the various products and lenders. Look at the fees, flexibility and features the loans come with to get a better idea of which ones work for you.
When you've found a product you're interested in hit the green button and you'll be taken to either a website or a form, where you can leave your details and get in touch with a mortgage expert. They'll guide you through the application process.
Can I borrow 95% with no genuine savings?
It is possible buy a property without saving a deposit at all, but it isn't easy. Most lenders require at least 5% genuine savings. This is often defined as money that's been sitting in your account for at least 6 months. But there are ways around this:
- Parental guarantor. If your parents own a property they can use it as security to guarantee your mortgage. You have the option of saving 5% yourself and getting your parents to guarantee the other 15% of the deposit. This way you can avoid LMI. But some lenders will allow your guarantor to cover the full 20% of the deposit.
- First home owners grant (FHOG). If you're eligible for a first home owners grant this can form part of your deposit, making it even easier to get to 5%.
- Selling shares or other assets. You can sell off an investment and use the cash as a deposit but you may need to satisfy the genuine savings rule.
- Cash gift or inheritance. If you're fortunate enough to receive a cash gift or inheritance you could use this as your deposit but again, watch out for the genuine savings rule. Some lenders may accept a 10% deposit made of a gift or inheritance, but you need to do your research.
Learn more about how you can save a deposit with our comprehensive deposit savings guide.
Are there any risks with these mortgages?
Aside from LMI costs and more scrutiny from lenders, getting a mortgage with a 5% deposit means having a smaller deposit means borrowing more money and therefore paying more interest.
It also means having less equity, which is potentially risky if your property falls in value and you can't repay your mortgage.
Let's look at both situations.
A smaller deposit means more paying more in interest
Getting a loan with such a small deposit inevitably means paying more in interest over time. To get a clearer idea of the difference in interest costs, use our loan repayment calculator and enter your borrowing details. Use the same interest rate and loan term but try entering different loan amounts. The difference in interest you'll pay over the life of the loan can be significant. Here's an example:
Property cost: $600,000
- 20% deposit = $120,000 (loan amount of $480,000)
- Interest rate: 3.65%
- Loan term: 30 years
- Monthly repayments: $2,195.81
- Total interest payable: $310,490.12
Property cost: $600,000
- 5% deposit = $30,000 (loan amount of $570,000)
- Interest rate: 3.65%
- Loan term: 30 years
- Monthly repayments: $2,607.52
- Total interest payable: $368,707.02
The risk of negative equity
Equity refers to the amount of your property you actually own. In other words, the value of the property minus the mortgage debt. If you buy a home with a 20% deposit you have 20% equity at the start. As you repay the loan principal (the money you borrowed) your equity increases.
But if property prices fall (as they sometimes do) your equity will decrease. If you'd paid off half your mortgage then you're still in a decent position. But if you've just bought a property with only a 5% deposit then even a small price fall could see you end up in negative equity. Having negative equity makes it much harder to sell your property or refinance your mortgage.
As long as you keep making repayments on the mortgage principal your equity should increase in the long term.
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