95 Per Cent Home Loan
If you do not have guarantor or an additional property with equity, then you can only borrow maximum 95 per cent.Who is eligible for 95 per cent loan?
- 95 per cent loans are insured with the lender mortgage insurance as to the banks, borrowing more than 80 per cent of the purchased price is considered to be higher risk.
- Perfect credit history: Your credit file must be clear and had no default in the past. If you have any current debts, you must meet the repayments on time. Most lenders have their own credit scoring when assessing your application. If you fail the credit scoring, it is most likely that you cannot get your loan approved.
- Stable employment: You must be in the current job for at least 6 months
- Good income: Most lenders are very strict with the income because it indicates whether you can repay the home loan.
- Genuine savings: Most lenders require you to have savings of at least 5 per cent of the purchase price. This must be saved regularly for minimum 3 months. However, there are some lenders who can consider the rental history instead of genuine savings.
- Minimal debts: If your current unsecured debts, such as credit cards or personal loans, are more than 5 per cent of the purchased price, there is higher chance that you cannot get approved.
- Property location: Not many lenders take property in smaller town, inner city mortgage or any unusual properties.
- If you have good income, 5 per cent genuine savings but you do not have enough funds to cover stamp duty and other costs associated with the purchase, you may be eligible for more than 95 per cent home loan. In this case, the lenders will lend you 95 per cent LVR plus additional loan limit up to $20,000, which is almost enough to cover any purchasing costs.
- Each lender has its own lending criteria and they may offer different interest rate. As 95 per cent home loan is considered as higher risk application, it is better to find the lender who accepts your application rather than finding the one that offers lower interest rate but declines your application.
- If you apply for too many applications, your credit file will be damaged, which reduces the chance for you to get a home loan.
- If you are first home buyer and building or buying a new home in Victoria, you are only required to come up with 5 per cent deposit because the First Home Owner Grants and other concession that you get from the Government would be enough to cover other costs.
- If you are first home buyer, buying an established property or second home buyer or investor, you must have minimum 10 per cent of the purchase price to cover all associated costs such as stamp duty and conveyancing costs.
- LMI premium is expensive when you borrow 95 per cent of the purchase price. It starts from 1.5 per cent of the loan amount to 3.5 per cent of the loan amount. Basically, the LMI premium is depend on the loan size.
- If you want to capitalize LMI, which means that you add the LMI premium on top of the loan amount, maximum LVR you can borrow is 97 per cent. However, some lenders can lend the full LMI premium.