For many Aussie home buyers, saving for a 20% deposit on home loans is not just feasible. Although you’ll get higher chances of getting a loan approved with a higher downpayment, as well as better interest rates, saving such amount can be a challenge for the average Australian. It’s a good thing there are home loans that offer a 5% deposit on the total value of the property. These are called 95 home loans. What is it and how can you get one?
95% home loans are also known as 95% LVR loans where LVR stands for the loan-to-value ratio of the loan. This loan type means you are able to take out a low deposit loan for as little as 5% deposit on the home property. The standard is at 20% deposit for most home loans.
Many Australian lenders consider this type of loan as high risk compared to the standard 80% LVR at 20% deposit loan. Where lenders find the loan to be high risk, the application process is stricter and may require the borrower to get an LMI (Lenders Mortgage Insurance). For these types of loans, interest rates are higher than the average home loan.
Lenders are looking at two things above others to qualify you for a low deposit home loan. One is your deposit and the other is a steady income. First time home buyers may use the First Home Owners Grant as a deposit and less than 5% deposit if you are going to spend on LMI. A steady income means a regular income. If you have a strong financial position, you can even qualify for huge interest rate discounts.
Traditional banks will deny your application if you don’t meet their conditions. But there are specialized lenders who can still extend help.
Important notes
While it is possible for you to get a 95% loan, there are a few things you should consider as follows:
95 home loans are low deposit loans that give a chance for Australians to own a home despite having lesser savings for a deposit. This could be an easier route for many who are having a hard time saving up for the standard 20% deposit.
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