For first home buyers and investors purchasing a property, the most popular choice is a 90% home loan.
There is already equity in the property right from the start and so lenders are more relaxed with the terms of this loan.
You will still need to pass normal credit guidelines and serviceability requirements to secure your loan.
Do you qualify for a 90% loan?
In Australia each bank and non-bank lender has their own individual set of lending guidelines to evaluate your loan application. The trick to securing your loan is in choosing the lender that is the best match for you.
To qualify for a 90% loan you should meet the following general criteria:
· The purpose of the loan should be to purchase, refinance or build property. Owner occupied or investment properties are acceptable. Debt consolidation and some other loan purposes can be successful on a case by case basis.
· You should have a good credit history. If you have a few minor paid utility defaults or other small defaults your application may still be approved; if your application is convincing in other areas.
· You have to be up-to-date with your current obligations such as rent, credit cards and personal loans.
· Lenders prefer stable employment. Normally 6 months in your present job or 2 years in a similar job will suffice.
· Your income should be sufficient to cover the repayments of the loan.
This is called your ‘serviceability’. If you have genuine savings of 5% of the purchase price you will be in good standing with most lenders. Applications with no genuine savings (where the deposit comes from the sale of an asset or a gift) will generally be considered if you have a decent credit history.
So how do you find out which lender will accept your loan? Call us on 1300 55 10 45 or enquire online to speak to one of our mortgage brokers that specialise in 90% home and investment loans.
After we assess your circumstances we can work out which lenders are likely to approve your loan. Then we can compare the interest rates, fees and the price of LMI premiums and suggest which loan is the cheapest and best suited for your situation.
Although lenders often have similar interest rates for their 90% home loans, there are often significant differences in their fixed rates, hidden fees and LMI premiums.
We will normally suggest three suitable lenders and then you can choose the best loan for you. Please give us a call on 1300 55 10 45 or contact us online if you would like one of our specialists to work for you.
Can you get a 90% home loan for over $1,000,000?
The majority of lenders only approve 90% loans up to $1,000,000.
Policy restrictions from the mortgage insurers mean that the only way to borrow more is to have several properties as security for the loan. If you are in an especially strong financial position some banks (that have special agreements with their mortgage insurers) can consider a 90% loan up to $2,000,000.
Some lenders may allow you to borrow the cost of the LMI premium for loans up to $1,500,000 at 90% LVR. While for larger loans, you cannot borrow the mortgage insurance and so your loan will only amount to 87% of the property value after they deduct LMI.
Why can you only borrow 90%?
The majority of Australian lenders limit their maximum loan amount to 90% of the purchase price including the capitalised LMI premium. This is because lenders are worried about the number of first home buyers that have no genuine savings history coming into the mortgage market and the instability this could cause to house prices.
This is also the main reason why many lenders have put a stop to 95% loans and all lenders have stopped offering 100% loans.
This has also because some banks have received more applications than they can ordinarily process. The demand for credit exceeds the supply of funds and therefore banks are stricter with their credit policy in order to lower the number of people loan applications.