Our ever-changing finance industry can make things challenging for Australian property home buyers and investors.
In the past, we could access home loans with as little as a 5% deposit. Sometimes, you could borrow the entirety of the property’s value — and in some cases, loans as high as 105% were available. Nowadays, lending criteria from banks is stricter to protect YOU the consumer, and most banks and lenders have restricted the loan to valuation ratio that they’re willing to extend to borrowers, along with this they have changed the maximum loan to value ratio depending on your purpose of borrowing funds such as owner occupied and investment.
So, if you don’t have much of a deposit at the ready, is it possible to get a high valued loan to buy a house? The simple answer is, it depends and nine times out of ten a solution can be found.
If we look at the marketplace, on average including the big 4 banks for owner occupied purposes, they may be willing to finance home purchases of up to 95%, provided you have a very strong employment history and savings history and evidence of genuine savings. The loan amount will also strongly influence the lender’s decision. Non-bank lenders (those known not as the big 4) may also offer up to 95% of the property value. They may also add an extra 2% to help cover lenders mortgage insurance (LMI) capitalisation. This means the borrower can get a 95% loan and then add the cost of the LMI to the loan.
If a borrower is looking to gain funds for investment purposes, most lenders will allow up to 90% inclusive of lenders mortgage insurance (LMI). This lower lend doesn’t affect most investors as primarily they will use the equity held in other property to assist.
Ultimately, if you are looking for owner occupied lending or investment lending and whether you are buying in Melbourne Metropolitan or Regional Victoria, these tips can help boost your chances of gaining approval:
Six things you can prove to qualify for a low-deposit loan:
1. Strong income
Lenders are more conservative when assessing your ability to repay a high lend loan, so your serviceability ratio must be outstanding.
2. Genuine savings
You will generally need to prove that you have saved 5% of the purchase price.
If you are renting this criterion may be eliminated with some lenders- talk to use today if you would like more information regarding this.
3. Clear credit history
This means that your credit file has no blemishes whatsoever and that you have paid all of your bills such as rent, credit cards, personal loans and other debts on time, and every time.
If you are unsure on what your credit score or history may be- Please contact us and we can help you obtain this and work with you on what is possible.
4. Minimal debts/ Expenses
Applicants with several credit cards and many personal loans may struggle to be approved. As a general guide, people who have more than 7% of the purchase price in unsecured debts such as personal loans and credit cards are often not approved.
Most lenders these days do not just look at debts but your discretionary expenses such as Uber Eats/ Menulog, gambling, takeaway, AfterPay etc. If a customer is using all their income on these expenses which are not considered necessities the lender may decline your application.
This doesn’t mean there are not solutions available for you if you happen to have a few debts and have a high expense on the Uber Eats- talk to use today if you would like more information regarding this.
5. Stable employment
In most cases you must have been in your current job for at least six months to one year or if you have changed jobs recently can prove 2 years industry experience in the same role or similar role.
6. Good asset position
Lenders want to see that you have a good asset position relative to your age and income.
If you would like to know more about your deposit needs, what options are available to you, what your credit score maybe or even if you would just like to have some more knowledge in your toolkit please contact us today for your free no obligation consultation.