85% Home Loan
- Max loan $1,500,000 (1.5 Million) at 85%.
- You must have a clear credit history.
- This is for low risk borrowers only, strict criteria apply
This gives you significant discount that could save you thousands of dollars in mortgage insurance!
Things to look out for when applying for a 85% mortgage
- For 85% mortgages, know the importance of shopping around to get a good deal.
- Do you meet the lender’s credit criteria? In particular, does the lender have a genuine savings policy (read below for more information).
- Have you compared the LMI? One of our lenders will waive the LMI for loans up to 85% of the property value. If you qualify for this offer you can save thousands of dollars!
- Will your lender allow you to ‘capitalize’ the LMI premium?
- Further, don’t forget to compare all other aspects of the loan such as the interest rate, repayment terms, features and to ask about any hidden fees or charges.
- Clear credit history: This means that your credit file has no blemishes whatsoever and you have paid all of your bills such as rent, credit cards, personal loans and other debts on time, every time for the last 6 months.
- Stable employment: In most cases, you must have been in your current job for the past 6 months or more to qualify but sometimes an exception can be made to this policy.
- An excellent income: Lenders are more conservative when assessing your ability to repay any loan over 80% of the property value.
- Strong asset position: Lenders want to see that you have a good asset position relative to your age and income.
- Genuine savings: Many lenders require you to have saved 5% of the purchase price but not every lender has this requirement! Some lenders will allow you to borrow with no genuine savings.
90% Home Loan
Many Australian lenders have limited their maximum loan amount to 90% of the purchase price plus the capitalized LMI premium. Many lenders are concerned about the number of first home buyers with no savings history entering the market and the volatility this may create in house prices and to their risk. .This is the primary reason why many lenders have withdrawn 95% home loans and all lenders have withdrawn 100% loans .Another factor is that some banks have been inundated with applications far in excess of what they can normally process. When demand for credit outstrips the supply of funds, banks tend to restrict their credit policy to reduce the number of people applying for loans.
Each bank and non-bank lender in Australia has their own set of lending guidelines that they use to assess your application. The secret to getting your loan approved is in knowing which lender is a good match for you. Common criteria are:
Loan purpose: To purchase, refinance or build an owner occupied or investment property. Some other loan purposes such as debt consolidation are acceptable on a case by case basis.
Credit history: Minor paid utility defaults and other small defaults are sometimes acceptable if your application is strong in other areas.
Other debts: You must be paying your current liabilities such as rent, credit cards and personal loans on time.
Employment: Stable employment is preferred, generally 6 months in your current job or 2 years in the same line of work.
Income: Your serviceability (ability to pay the loan) must be strong.
Savings: 5% of the purchase price in ‘Genuine Savings’ is not necessarily required by all lenders. No ‘Genuine Savings’ applications (deposit from a gift, sale of an asset, etc.) MAY be considered if you have a clear credit history.
This means that if you have received a gift, inheritance, the ‘First Home Owners Grant’ or even taken out a personal loan (in some limited cases ), you may be eligible to borrow 90% LVR with no evidence of genuine savings.
95% Home Loan
Clear credit history: This means that your credit file has no blemishes whatsoever, specifically, payment of all of your bills such as rent, credit cards, personal loans and other debts on time every time for the last 6 months.
Stable employment: In most cases you must have been in your current job for 6 to 12 months. Sometimes an exception can be made to this policy.
A good income: Lenders are more conservative when assessing your ability to repay a 95% loan. For this reason your ‘serviceability ratio’ must be outstanding.
Reasonable asset position: Lenders want to see that you have a good asset position relative to your age and income.(a 20 year old applicant with $20 000 worth of assets would be viewed more favourably than a 45 year old with the same amount of money)
Genuine Savings: Almost all lenders require you to prove that you have saved 5% of the purchase price. If you don’t have genuine savings, then you MAY qua;ify for a 95% No Savings loan or a Guarantor loan.
Minimal debts: People with many credit cards and personal loans are generally not accepted. As a rough guide, people who have more than 5% of the purchase price in unsecured debts such as personal loans and credit cards are often not approved.
Location / property type: Many lenders may be hesitant to approve loans for properties in smaller towns, in high rise unit blocks in the CBD or unusual properties.
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 cannot be capitalised so, in effect, you are borrowing approximately 91.5% after your LMI premium has been deducted from the loan.
First Home Buyers Loans
In total you will typically need 5% to 10% of the purchase price, including the FHOG
.If you are building a home then your grant is not available until construction commences.
If you have a ‘Guarantor’ then you may not need any savings whatsoever.
Yes the state governments offer a range of stamp duty exemptions or stamp duty discounts, additional grants and other benefits that can help you to buy your first home.
Mortgage stamp duty: This is a hidden state government fee that is calculated based on the amount that you borrow. Most states either waive this for first home buyers or are phasing this fee out.
Purchase stamp duty: This is one of the most expensive costs associated with buying a home. Some states offer stamp duty concessions for first home buyers. You can find a stamp duty calculator on most state government websites that will take any first home concessions into account.
Registration fees: Another government fee! This is a small fee of around $200 for registering the change of name on the property title and registering the new mortgage on the title.
Conveyancing / legal fees: You can expect to pay between $700 and $1,500 for your conveyancing costs for a standard first home purchase.
Lender fees: Some lenders charge setup fees of up to $850 whilst others will waive all the setup fees for your loan..
LMI: This is the other major cost of buying your first home with no deposit.The LMI can range from $0 for a quick start loan up to 5.1% of the loan amount.
Guaranteeing your loan: If your parents offer their home or an investment property as additional security for your loan, then the bank can lend you up to 110% of the property value with no LMI and a low interest rate! This is the only genuine way to buy a home with no deposit.
Gifted deposit In the past most lenders required proof that you had saved your deposit, known as genuine savings. The rationale is that if you can save money, you can repay a loan. These days some lenders will accept you even if you didn’t save your deposit.
Without a guarantee from your parents you cannot qualify for a No Deposit loan.
Guarantor Loans And Mortgages
You do not need a deposit, allowing you to buy a home now.
Save money by not paying a .LMI premium.
Discounted interest rates may be available from some lenders.
You may be able to consolidate some minor debts such as credit cards when you buy your home.
Construction: 105% of the total land value and cost of construction.
Refinancing: 100% of the property value.
Debt consolidation and purchase: 110% of the property value.
Investors: 105% of the value of your investment property.
Technically there is no maximum loan size. However borrowing over $1,000,000 will require you to meet additional credit criteria.
For example, if your guarantor had a home loan with $200,000 owing and they needed to give a limited guarantee of $100,000 then the total debt secured on their property would be $300,000. Their home must be worth over $400,000 or more for the guarantor loan to be approved. Calculate: $300 000 is 75% of $400 000.
If your income, job and credit history are all acceptable to the bank, then you are a highly sought after borrower.
Banks are increasingly recognizing the value of first home buyers and so have offered a range of discounts on their interest rates, loan approval fees, application and valuation fees
- For borrowers
No deposit loans have become an attractive option for many people who do not have the funds to contribute towards a mortgage.
Some of the main benefits of guarantor loans include:
No savings are needed.
You can borrow the full purchase amount plus the money needed for stamp duty or any other associated costs.
Lenders mortgage insurance (LMI) is not required!
Both investors and owner occupier buyers can take advantage of this product.
In many cases the interest rates are exceptionally low.
- For guarantors
Guarantors have a fixed liability and can only be pursued for the agreed guaranteed amount, making this a more secure option. The guarantee can be secured by either their property or a term deposit.
No Deposit Home Loans
The main type of no deposit loan is known as a guarantor loan. These loans are also available with all the normal loan benefits such as 100% offset, fixed interest rates and interest only periods. Some people are eligible for discounted professional package interest rates, basic loan packages and application fee waivers as well This is the best way to buy a property with no deposit!
You can borrow 105% of the purchase price
You don’t need any savings
Your parents must provide a guarantee, secured on their property
The guarantee can be released upon request if, at a later date, the borrower meets standard bank criteria and the bank agrees. Normally, this is when the borrower owes less than 80% of the value of their property.
Going for a guarantor home loan will save you a small fortune as you will not pay an LMI ( Lenders Mortgage Insurance) premium.
- Can your parents gift you 5% to 15% of the purchase price?
Some lenders can consider your home loan even if you didn’t save the deposit yourself
Approximately 60% of first home buyers receive help from their parents
Some lenders will allow a borrowed deposit and do not require genuine savings but you may need some funds of your own to cover stamp duty and other expenses.
- Do you have a very high income?
You must have no other debt or only a small amount of debt such as car loans or credit cards to qualify.
You must have a clear credit history.
You can borrow up to 95% of the purchase price plus a personal loan.
If you already own a property you may be able to access to built up equity. This method is very popular with investors and a good way to build up your property portfolio.
You can use your existing equity as a deposit
If you have sufficient equity then you don’t need any savings at all
We can help with valuing your existing property.
Do you have over $100,000 in superannuation? (Even if you don’t have quite that much, we may be able to assist).
You can set up a self-managed superannuation fund (SMSF) to buy a property
The property must be for investment purposes, not to occupy.
You can borrow up to 80% of the purchase price
With this method, you do not need to have any savings yourself because your superannuation will act as a deposit.
This is a complex strategy that requires financial advice before you begin. Contact your accountant and read more under our SMSF mortgages.
- Do you have a small 2% to 3% deposit or can you pay a small deposit in instalments whilst already occupying the property?
- Are you having trouble qualifying for a bank loan?
Vendor finance can be expensive so check with us to see if you qualify with a bank first
In most cases, people who buy a property via vendor finance have a problem with their credit history and do not have a guarantor. In most cases the vendor (seller) will need you to have a small deposit to show that you are committed to the purchase. This option is a last resort, but it may work for you. Quite often, sellers in rural areas offer their property for sale via this method as they find it difficult to sell. The property MAY be priced slightly higher to reflect the risk the seller is taking. Please take into account that most vendor finance deals want you to switch to a mortgage after a few years. Inform yourself about ‘Vendor Finance’ and the different options and contracts available using this method. You may also look into 95% home loans or Idea 1 to 5.before using this method.
- What if none of these ideas work for me?
Unfortunately, at this time there are no lenders in Australia that offer a No Deposit loan other than the above options. The best way for you to get a loan is to save a deposit of your own.
Following these tips will help you to qualify for a mortgage:
Prepare to buy:Read through this website and familiarize yourself with what lenders are looking for when they assess mortgage applications. You may not be able to get a mortgage right now, but if you take the right steps ( and we can advise) you can be ready in 6 , 12 months time.
Save a 5% deposit: Save 5% of the purchase price in a bank account in your name. Make regular contributions.
Don’t change jobs: When you are borrowing close to 100% of the purchase price, the lenders like to see that you are stable and that you have been in your job for some time.
Pay your bills on time: If you don’t have much of a deposit then the lenders will lose a significant amount of money if you can’t make the repayments. For this reason, they look very closely at your credit file and rental history.
Stay in touch: Our mortgage brokers specialise in guarantor and 95% home loans. You can ask us a question and regularly check in with us to make sure you are on track.
No Deposit Construction Loan
You already own the house: If you own the house already and intend to knock down and rebuild or to carry out significant renovations then this is possible using a no deposit loan. Note that some lenders will restrict you to 95% of the value of the current house plus the cost of the renovations.
You are buying a house: If you are buying a home and have a building contract in place to commence renovations immediately then this is looked on more favourably by the banks. In these cases borrowing 100% of the house plus the building contract price is usually possible.
It t is also possible to include the cost of other improvements such as pools, a garage, a shed, a pergola, a spa, septic tanks, water tanks and utility connections to be included in the building loan. Note that you should obtain quotes for this work up front or include it in your building contract price with your house builder. If you do not provide evidence of the cost, your bank may not approve the extra money for you.
In some cases, and almost always for the final drawdown, the bank will send a valuer to the property to complete a progress inspection. A progress inspection may delay the payment to the builder for up to one week, so we recommend that you put in your drawdown requests as soon as possible so that you do not delay the payment to your builder!
Building contract / quote: If you have chosen a builder then you will need either a formal quote or the final building contract so that the bank can assess the loan. The building contract should include the drawdown schedule requested by the builder.
Builder’s licence / insurance details: Your builder must have the required licences and insurances for your state. Always check that your project is covered by Home Warranty Insurance (HWI) or the equivalent for your state.
Council approved plans: Drawings of the proposed buildings that have been approved by the council will be required so that the bank’s valuer can assess the on-completion value of your property.
Quotes for other work: Please provide quotes for any landscaping, sheds, pools or other work that will not be completed by the builder that is building the house.
No Deposit Investment Loan
- You don’t need a deposit. You can borrow the full purchase price and costs.
- You don’t need to pay an LMI premium.
- You can qualify for exceptional interest rate discounts.
- You can buy a property now rather than having to wait until you’ve saved a big enough deposit.
You are not required to have Genuine Savings.
You cannot buy multiple investment properties, only one (some exceptions apply).
You must not have excessive unsecured debts such as credit cards (some exceptions apply).
Your parents must be working or be ‘Self Funded Retirees’.
No Deposit LMI (Lenders Mortgage Insurance)
- LMI : ANZ, CBA, NAB, Westpac, ING, Suncorp, St. George, Widebay Capricorn, AMP, Citibank and many more.
- Their own insurer: ANZ, Westpac, St. George and Widebay Capricorn.
- Risk fee: St. George (LEF), ING and most non-conforming lenders.
The LMI premium is calculated based on 1/the loan amount,2/ the LVR ( Loan to Value Ratio) ,3/ the LMI product type (e.g. First home buyer, non genuine savings, low doc, 100% loan etc) and the specific lender. Even though Genworth and PMI deal with most lenders, they have different pricing for different lenders and for different products
Cost examples:If you borrow less than $300,000 your LMI will be incredibly cheap. If you borrow just over $300,000 then your LMI may increase by several thousand dollars. The same leap occurs when you borrow more than $500,000. This is because lenders have different premium rates depending on if your loan is less than $300,000, less than $500,000 or more than $500,000
The LMI table below is an example only and does not include your state governments stamp duty, if applicable (usually 10% of the premium). LMI premiums are subject to change.. Construction loans have the same LMI premiums as normal loans
|Less than $300,000||$300,000 to $500,000||More than $500,000|
|First Time Buyer -100% Loan||2.02% to 2.85% of the loan amount||: 2.61% to 3.71% of the loan amount||
|2nd Home Buyer – 100% Loan LMI||
|Investor 100% loan||2.50% to 2.56% of the loan amount||2.99% to 3.34% of the loan amount||3.55% of the loan amount|
|Waived LMI deal||Zero%||Zero%||Zero%|
Banks/Lenders do not publish their LMI rates on their websites Several lenders have issued calculators that allow their bank managers and also mortgage brokers to accurately calculate an LMI premium for you. These are not available to the general public as they are quite complex.
No Genuine Savings Loans
90% home loans: You can borrow 90% of the purchase price from three of our lenders irrespective of the source of your deposit.
95% home loans: One of our lenders can approve a home loan for up to 95% of the purchase price with no genuine savings.
- Genuine Savings
- Money that has been held in a savings account for 3 to 6 months (depending on the lender).
- Money that you have saved over the last 3 months.
- Money held in a term deposit for over 3 months.
- Equity in an existing property (some lenders only).
- Proceeds from the sale of a property (some lenders only).
- Shares held for over 3 months.
If you are currently renting, then some lenders will consider the rent you have paid in the last 12 months as genuine savings (only a couple of lenders ).
- Non Genuine Savings
- A gift from a family member
- First Home Owners Grant (FHOG).
- Advances on wages/commission from an employer.
- Financing of a deposit (via Personal loan, credit card or other borrowings)
- Builder discount/finance
- Vendor discount/finance
- Proceeds from sale of motor vehicles.
- Windfall gains.
- One-off government payments (e.g. tax refund).
- You must be paying your rent on time (if you are renting).
- Both applicants must have stable employment.
- Your credit history must be free of any defaults or adverse listings and must not have too many credit enquiries.
- You must have an excellent Credit Score.
- You must not have too many consumer debts such as credit cards and personal loans.
- You must be able to afford the debt comfortably. You are not allowed to borrow to your limit.
If you do not meet this criteria then you will only qualify for a 90% or 85% loan
Personal Loan As A Deposit
Little existing debt (car loans, high credit card balances, etc).
A clear credit history.
Some savings to make up any shortfall.
A proven rental history
Using my Superannuation as a Deposit
A SMSF/Self-Managed Super Fund Home Loan is where you buy an investment property in your super fund. The rules are very different.
Vendor Finance Home Purchase
You only need 2% of the purchase price as a deposit,
You can delay paying your stamp duty,
You benefit from the property rising in value,
Easy to qualify for even if you have bad credit or trouble proving your income.
The people that often apply for vendor finance often:
Don’t have Genuine Savings AND can’t find a Guarantor.
Are self employed but only have very limited income evidence or no financials , so they don’t qualify for Full-Doc and also not for Low-Doc loans.,
Have a Credit Problem of some kind (bad credit, arrears, several defaults ,current or past bankruptcy and they don’t qualify for a ‘Bad Credit ‘Home loan),
Have no credit history as they may be new too Australia or have just returned from a long period overseas.
Don’t meet standard bank lending criteria.
Some people choose this method as they don’t WANT to put down a deposit.
You must have at least 2% of the purchase price as a deposit or be able to pay the deposit in instalments whilst already occupying the home.,
You must be able to afford the loan repayments
Overall your situation must ‘make sense’. Not everyone will qualify for rent to own or vendor finance. If you clearly cannot afford the repayments or you do not have a good explanation for your poor credit history, then you are not yet ready to buy a home.
This is also known as a “wrap”. You will work with a private investor to help you buy a home. When you find a home that you would like to buy, the investor will negotiate to try to buy that house for less than the market value. The investor buys the home in their name and then sells it to you at a higher price with an extended settlement. Instead of paying the investor in one lump sum to purchase the property outright, you pay the investor in instalments over several years until you are able to qualify for a loan with a bank and refinance the investor out. Until then, you do not completely own the property although you do have a binding contract in the form of a Vendor Finance Agreement. This is the most common type of vendor finance purchase in Australia.
Rent to Own / Rent to Buy
This is where you have an agreement with the investor to rent the home from him at higher than the normal market rent. In return, you have an option to buy the property at a later date for a set price. This is ideal for people who will qualify for a bank loan in a few years time and who would like to secure tenure of their dream home now .and also lock in the purchase price. Most arrangements of this nature last for 2, 3 or 4 years after which time the option either1/ has to be exercised (you get a mortgage and buy the property) or you decide to move on or you renegotiate a new purchase price and new time frame. You only really OWN the property once you have bought it outright.
With this method, you borrow 80% of the property value from a bank as it is easier to qualify for a 80 % loan than for a 95% home loan. The remainder will be lent to you by the vendor (seller). You make payments to the bank and also to the vendor with the aim to refinance the vendor’s loan to a standard bank loan within two to five years. If you go for this option then you must be committed to making large repayments to repay the vendor’s loan as quickly as possible.
In general, you will be buying the property for between 10% and 20% more than what the investor paid for the property. In addition to the slightly higher purchase price, the interest rate on the amount you owe to the investor will usually be at a 1% to 4% higher than the interest rate that the investor pays to their bank. So if current bank mortgage rates are at 5%, you would expect to pay 6% to 9% p.a .Some vendors may also charge an option fee.
The cost of your purchase will depend on how high a risk you are to the investor and how quickly you can refinance out of the vendor finance scheme. If you are able to refinance quickly then the investor may be able to offer you more favourable terms.
Of course the valuation assessment by the bank valuer is very important and even though you probably paid a bit more for the property than it was worth (market value) at the time of purchase, you want to be really careful that you don’t pay too much. Two, three or for years after the initial purchase you want the property valuation and your capital repayments to result in you now owning 80% of the property value ( as valued by a standard valuer on the banks panel).Do not rely only on your property rising in value to help you get down to owing 80% of the property value. You should commit to making large additional repayments to reduce your debt. Please keep in mind that bank valuers are conservative so it may take a little longer than you predict to reduce your debt enough to refinance.
The Vendor Finance information on this page is general and will give you an idea as to what is possible, however vendor finance agreements are negotiated between you and a private investor so each agreement will vary. The actual terms of your finance are likely to be at least slightly different to what we have written above so please take the time to understand your agreement fully before deciding if it is for you.
1/If you miss several payments with a vendor finance instalment plan or rent to buy scheme, you may lose the deposit you have paid and the right to purchase the property. Private investors do not often have the financial means to hold onto a property if you are not making your repayments. For this reason they will be less lenient with you than a bank would if you missed payments on a mortgage.
2/You will be paying more for the property than if you had bought it on the open market with a standard mortgage. This is represented by either a higher purchase price ( usually 5% to 20% higher than market value) or by a higher interest rate (usually 1% to 4% higher than the vender is paying to their bank) or by paying a so called monthy option fee or by a combination of these. These compensate the vendor for the risk they are taking and the fact that they can’t sell the property outright until you decide to complete the purchase.
3/ When you are ready to re-finance with the bank, the property may not be worth what you thought is was. This could be dues to the vendor overstating the value at the beginning or because the general property market moved downwards.
4/Before you have actually refinanced and bought the property, you don’t really own it ( this could be different depending on your specific contract. Banks may not recognize equity you have built up in your vendor finance property, so they won’t allow you to borrow against it or redraw some money to eg buy a car. The equity may not be recognized as part of your ‘net-worth’ until you fully completed the vendor purchase agreement and the property is in your name.