85 per cent loan is suitable for those who have some significant savings or having help from parents or family member. You still need to pay Lenders Mortgage Insurance on this type of loan. However, the premium is significantly cheaper as you are a considerably lower risk client. Also, unlike 90 per cent home loan or 95 per cent home loan, qualifying criteria of lenders are much more flexible.
Qualify for an 85 per cent loan:
Credit history: To get a mortgage with LVR at 85 per cent, you must have a good credit history. Your credit file must be clean and you must also be on time with the repayments on any current debts, such as credit cards, personal loans or rent.
Stable employment: Some lenders may need you to be with your current employer for at least 6 months.
Genuine savings: In order to get the loan, most lenders require you to have minimum 5 per cent genuine savings. The lenders normally ask for your bank statements showing that you have been saving the fund regularly. However, some lenders do not require this condition with 85 per cent mortgage. Instead of genuine savings, they can consider gift from parents or rental history.
In order to purchase your first home, you need to have approximately 15 per cent of the purchase to cover the difference between the purchase price and the loan amount. Also, you would need another 5 per cent to cover for all stamp duty, conveyancing fees etc.