A 95% Home loan is a loan where the lender lends up to 95% of the value of a property. 95% Home loans are generally only available for property purchases, although there are some lenders that may also offer this type of loan for a dollar for dollar refinance.
What is a 95% Home Loan?
How much deposit do I need?
You need enough deposit to cover 5% of the purchase price of the property plus the purchase costs. The exact amount of deposit required to obtain a 95% loan is dependent on factors such as the following:
- Your eligibility for the First Home Owners Grant. If you are eligible for the First Home Owners Grant this may reduce the amount of savings you require.
- Your eligibility for stamp duty concessions and exemptions. If the purchase price of the property is low enough to avoid stamp duty then this reduces the amount of savings you require.
- Whether the lender will allow you to add Lenders Mortgage Insurance (LMI) to the loan. As a general rule of thumb most major lenders will lend a maximum of 95% of the purchase price INCLUDING LMI. This means that at these lenders you need sufficient savings for a 5% deposit PLUS LMI and other purchase costs. We have access to a few lenders that may allow first home buyers to add the LMI on top of the 95% loan, therefore reducing the total deposit required. require a minimum deposit of 5% of the purchase price unless you have a guarantor. In addition to your deposit, you will need to have enough savings to cover costs such as government charges, stamp duty and conveyancing fees. It is recommended to have at least 5-10% deposit saved to cover deposits and costs.
Please contact us to find out exactly how much money you need to purchase a home. We have access to calculators that can determine this based on the purchase price.
How do I Qualify for a 95% Home Loan?
To Qualify for a 95% home loan it is recommended that you have:
- A regular steady income to support your mortgage repayments
- At least 5% of the purchase price in cash, saved over a period of at least 3 months, plus sufficient additional funds for purchase costs such as stamp duty.
- If your 5% deposit is a gift it is best that you have a good rental history for the past 12 months
- A clean credit file. That is, no defaults and not too many finance applications made in the past couple of years.
How much do I need to pay in Lenders Mortgage Insurance (LMI) on a 95% loan?
As soon as you borrow more than 90% of the property value the LMI premiums jump considerably. The premium is dependent on 2 factors, the loan amount and the Loan to Valuation Ratio (LVR). The higher the loan amount and the higher the LVR the higher the LMI premium rate will be.
On a 95% loan the LMI premium can range anywhere from 2% to more than 4.5% of the loan amount, depending on the loan size.
There can be significant differences between the LMI premiums charged at different lenders, particularly where the loan amount is in the $500,000 to $600,000 range.
When suggesting loan option we look at the interest rates of the loans but also look at the LMI premiums. If you can save thousands of dollars in LMI this can more than offset a slightly higher interest rate.
What is the maximum loan amount available for a 95% loan?
Generally, most lenders will allow a maximum loan amount of $700,000 to $1,000,000 on a 95% home loan.
We do have access to one major lender who can consider 95% loans of up to $2,500,000 for very high income applicants in a strong financial position.