Not everyone can afford a 20 per cent deposit on a property. With prices sky high in capital cities like Sydney and Melbourne, asking for a 20 per cent deposit may mean asking Australians to save hundreds of thousands of dollars. 

This is where higher LVR home loans may come in handy, such as 90% LVR home loans. However, saving a smaller deposit does come with its own risks and additional costs. 

Here is everything you need to know about 90% LVR home loans.

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2.55%

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2.60%

Company
CUA
Repayment

$1,353

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Borrow up to 90%
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3.10

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2.79%

Fixed - 3 years

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4.46%

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CUA
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$698

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1.71

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3.29%

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3.71%

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NAB
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$823

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1.46

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Advertised Rate

2.05%

Fixed - 2 years

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2.65%

Company
Adelaide Bank
Repayment

$1,279

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Borrow up to 94.9999%
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2.68

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2.79%

Fixed - 5 years

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3.87%

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NAB
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$1,390

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Borrow up to 95%
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2.53

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Learn more about home loans

What is a 90% LVR home loan

Before plunging into the numbers and how much of a deposit you need to buy a piece of real estate, let’s start with the LVR part.

LVR translates to ‘loan-to-value ratio’, which means how much money you can borrow versus the value of the property being purchased. For example, if a property was worth $400,000, you had a 20% deposit of $80,000 and you were borrowing $320,000 from a lender, then your loan-to-value ratio would be 80 per cent. This is because you were borrowing 80 per cent of that property's value. 

This is a very important equation and will determine how much money you can borrow to buy a property, and whether or not you can purchase the property you want.

When you’re researching home loan products, most mortgages will list the LVR. This does vary from lender to lender, and loan to loan. The percentage of LVR will determine how much you need for a deposit.

In the case of a 90 per cent LVR home loan, the loan amount (what you borrow) is calculated as 90 per cent of the property’s value.

If you’re allowed to borrow up to 90 per cent of the sale price, you would need a deposit of at least 10 per cent of the property’s value to secure this type of loan.

Calculating the LVR of a home loan

An easy way of calculating LVR is to divide the purchase price of the property by 100 and then multiply that amount by the LVR.

Let’s say the property costs $1,000,000. If you divide by 100, the LVR would be $10,000; if you then multiplied by 90, you’d get $900,000.

Based on this calculation, you could deduce that you would need the difference between these two amounts ($100,000) as a deposit to qualify for the home loan. Of course, this figure doesn’t factor in associated purchase costs such as stamp duty and conveyancing.

This is only a guide, and not a hard and fast rule. Some lenders calculate the LVR based on a property’s valuation, not the purchase price.

The purchase (or listed) price of a property may differ from the property’s actual value. Where there’s a difference between these two figures, a lender or mortgage insurer may use the lower value.

It’s worth noting that not all lenders require a valuation of the property.

Am I eligible for a 90% LVR home loan?

You’ve found a property to buy, and have a 10 per cent deposit plus additional funds for upfront purchase costs such as legal fees, stamp duty and pest and building inspections – but what else may determine if you're eligible for a 90% LVR home loan? 

Each lender will have its own lending criteria for a home loan, but there are ways to do your due diligence and ensure your application is as supported as possible.

  • Borrowing power calculator. A lender will calculate your ability to service a loan based on the property price, your income, expenses and dependents. But a borrowing power calculator may also give you a good idea of this before you apply. If your results are lower than you'd like, you may want to consider adjusting your budget, eliminating some expenses or squirrelling away more savings. 
  • Genuine savings. Genuine savings are (generally) determined by the amount of cash you have in your bank account, and how long you’ve been saving. For example, you might have saved the 10 per cent deposit over a period of years, which would be considered genuine savings. Or it might have been deposited recently by a family member, which might not be considered genuine savings. It will come down to the lender’s discretion as to what it considers to be genuine savings.
  • Credit score. Your lender may not grant you a home loan just because you have the deposit; a bad credit rating could impact whether or not your application is successful. If you don’t know your credit score, there are companies that can provide a copy of your credit history either for free (which takes longer), or for a relatively small fee (which is quicker).

What are the benefits of a 90% LVR home loan?

The obvious benefit of a 90 per cent LVR home loan is the amount you can potentially borrow. It’s easier to save a 10 per cent deposit than a 20 per cent deposit.

Another benefit is that it might allow you to qualify for a mortgage – something that might not be possible if you had to take out a home loan with an LVR of 80 per cent.

And if you’re already a homeowner, being able to secure a 90 per cent LVR home loan could mean you get to purchase another (investment) property and start to grow a real estate portfolio.

How big of a deposit should I save?

Lenders and financial experts typically recommend saving a deposit of 20 per cent, or having an 80% LVR. 

While a smaller deposit will make the saving and waiting process a little easier for would-be borrowers, it does come with its own risks, including:

  • Lenders mortgage insurance. One cost you will run into by having a deposit under 20 per cent/an LVR under 80 is lenders mortgage insurance (LMI). LMI indemnifies the lender against any financial losses in the event you default on your home loan repayments. It’s a one-off payment that is either paid by you as part of your deposit (thus increasing the amount you need for a deposit) or is added to the amount you borrow. LMI can be tens of thousands of dollars, depending on the property price, so check out an LMI calculator before you apply. 
  • Borrowing more. Having a larger deposit does mean you're borrowing less and therefore taking on less debt from a lender. A mortgage is generally one of the biggest ongoing bills you'll have in your lifetime, and the smaller the amount borrowed, the less interest you'll also have to pay.
  • Higher interest rates. Generally speaking, lenders look favourably on borrowers with larger deposits as this helps to make them appear less 'risky' on their home loan application. Due to this reduced risk on the lender, a borrower with a larger deposit will typically be offered a more competitive interest rate. 
  • Less special offers. Not only may a lender offer someone with a lower LVR a more competitive interest rate, they may be offered greater features and extras on their mortgage. Having a 90% LVR or higher may mean you're unable to access handy features like an offset account or the ability to make additional repayments. You may also miss out on benefits like cash back offers or bundled home loan packages with credit cards.

What type of property can I purchase with a 90% LVR home loan?

Whether you're looking for an investment property or a home to live in as a first home buyer, home loan lenders will generally have a loan option that suits your property type. 

Most 90 per cent LVR home loans are available for owner-occupiers, investment purchases, debt consolidation and refinancing. You may also be able to find 90% LVR variable rate loans or fixed rate loans. 

When doing your research, the loan should outline what it can be used for.

Now that you know how to calculate a 90 per cent LVR home loan, and what you can buy, it’s worth knowing whether you qualify.

Can a broker help me with a 90% LVR home loan?

If you're still unsure of whether you may qualify for a 90% LVR home loan, it may be worth consulting with a mortgage broker. 

Mortgage brokers may be able to help save you time and effort in choosing a home loan. They are considered experts in their field and have a greater experience in translating everyday Australians' unique financial situation into eligible home loan applications. 

If your credit score isn't perfect, or if your deposit is under 20 per cent, the number of loans you may qualify for could be lessened. A mortgage broker can use their specialist knowledge to potentially guide you towards home loan offers that you may be eligible for.

Frequently asked questions

How much deposit do I need for a home loan from ANZ?

Like other mortgage lenders, ANZ often prefers a home loan deposit of 20 per cent or more of the property value when you’re applying for a home loan. It may be possible to get a home loan with a smaller deposit of 10 per cent or even 5 per cent, but there are a few reasons to consider saving a larger deposit if possible:

  • A larger deposit tells a lender that you’re a great saver, which could help increase the chances of your home loan application getting approved.
  • The more money you pay as a deposit, the less you’ll have to borrow in your home loan. This could mean paying off your loan sooner, and being charged less total interest.
  • If your deposit is less than 20 per cent of the property value, you might incur additional costs, such as Lenders Mortgage Insurance (LMI).

How much deposit do I need for a home loan from NAB?

The right deposit size to get a home loan with an Australian lender will depend on the lender’s eligibility criteria and the value of your property.

Generally, lenders look favourably on applicants who save up a 20 per cent deposit for their property This also means applicants do not have to pay Lenders Mortgage Insurance (LMI). However, you may still be able to obtain a mortgage with a 10 - 15 per cent deposit.  

Keep in mind that NAB is one of the participating lenders for the First Home Loan Deposit Scheme, which allows eligible borrowers to buy a property with as low as a 5 per cent deposit without paying the LMI. The Federal Government guarantees up to 15 per cent of the deposit to help first-timers to become homeowners.

What is a loan-to-value ratio (LVR)?

A loan-to-value ratio (otherwise known as a Loan to Valuation Ratio or LVR), is a calculation lenders make to work out the value of your loan versus the value of your property, expressed as a percentage.   Lenders use this calculation to help assess your suitability for a home loan, and whether you need to pay lender’s mortgage insurance (LMI). As a general rule, most banks will require you to pay LMI if your loan-to-value ratio is 80 per cent or more.   LVR is worked out by dividing the loan amount by the value of the property. If you are looking for a quick ball-park estimate of LVR, the size of your deposit is a good indicator as it is directly proportionate to your LVR. For instance, a loan with an LVR of 80 per cent requires a deposit of 20 per cent, while a 90 per cent LVR requires 10 per cent down payment. 

LOAN AMOUNT / PROPERTY VALUE = LVR%

While this all sounds simple enough, it is worth doing a more accurate calculation of LVR before you commit to buying a place as there are some traps to be aware of. Firstly, the ‘loan amount’ is the price you paid for the property plus additional costs such as stamp duty and legal fees, minus your deposit amount. Secondly, the ‘property value’ is determined by your lender’s valuation of the property, not the price you paid for it, and sometimes these can differ so where possible, try and get your bank to evaluate the property before you put in an offer.

What is a low-deposit home loan?

A low-deposit home loan is a mortgage where you need to borrow more than 80 per cent of the purchase price – in other words, your deposit is less than 20 per cent of the purchase price.

For example, if you want to buy a $500,000 property, you’ll need a low-deposit home loan if your deposit is less than $100,000 and therefore you need to borrow more than $400,000.

As a general rule, you’ll need to pay LMI (lender’s mortgage insurance) if you take out a low-deposit home loan. You can use this LMI calculator to estimate your LMI payment.

What are the pros and cons of no-deposit home loans?

It’s no longer possible to get a no-deposit home loan in Australia. In some circumstances, you might be able to take out a mortgage with a 5 per cent deposit – but before you do so, it’s important to weigh up the pros and cons.

The big advantage of borrowing 95 per cent (also known as a 95 per cent home loan) is that you get to buy your property sooner. That may be particularly important if you plan to purchase in a rising market, where prices are increasing faster than you can accumulate savings.

But 95 per cent home loans also have disadvantages. First, the 95 per cent home loan market is relatively small, so you’ll have fewer options to choose from. Second, you’ll probably have to pay LMI (lender’s mortgage insurance). Third, you’ll probably be charged a higher interest rate. Fourth, the more you borrow, the more you’ll ultimately have to pay in interest. Fifth, if your property declines in value, your mortgage might end up being worth more than your home.

Will I have to pay lenders' mortgage insurance twice if I refinance?

If your deposit was less than 20 per cent of your property’s value when you took out your original loan, you may have paid lenders’ mortgage insurance (LMI) to cover the lender against the risk that you may default on your repayments. 

If you refinance to a new home loan, but still don’t have enough deposit and/or equity to provide 20 per cent security, you’ll need to pay for the lender’s LMI a second time. This could potentially add thousands or tens of thousands of dollars in upfront costs to your mortgage, so it’s important to consider whether the financial benefits of refinancing may be worth these costs.

Does Australia have no-deposit home loans?

Australia no longer has no-deposit home loans – or 100 per cent home loans as they’re also known – because they’re regarded as too risky.

However, some lenders allow some borrowers to take out mortgages with a 5 per cent deposit.

Another option is to source a deposit from elsewhere – either by using a parental guarantee or by drawing out equity from another property.

How can I avoid mortgage insurance?

Lenders mortgage insurance (LMI) can be avoided by having a substantial deposit saved up before you apply for a loan, usually around 20 per cent or more (or a LVR of 80 per cent or less). This amount needs to be considered genuine savings by your lender so it has to have been in your account for three months rather than a lump sum that has just been deposited.

Some lenders may even require a six months saving history so the best way to ensure you don’t end up paying LMI is to plan ahead for your home loan and save regularly.

Tip: You can use RateCity mortgage repayment calculator to calculate your LMI based on your borrowing profile

How much deposit will I need to buy a house?

A deposit of 20 per cent or more is ideal as it’s typically the amount a lender sees as ‘safe’. Being a safe borrower is a good position to be in as you’ll have a range of lenders to pick from, with some likely to offer up a lower interest rate as a reward. Additionally, a deposit of over 20 per cent usually eliminates the need for lender’s mortgage insurance (LMI) which can add thousands to the cost of buying your home.

While you can get a loan with as little as 5 per cent deposit, it’s definitely not the most advisable way to enter the home loan market. Banks view people with low deposits as ‘high risk’ and often charge higher interest rates as a precaution. The smaller your deposit, the more you’ll also have to pay in LMI as it works on a sliding scale dependent on your deposit size.

Can I take a personal loan after a home loan?

Are you struggling to pay the deposit for your dream home? A personal loan can help you pay the deposit. The question that may arise in your mind is can I take a home loan after a personal loan, or can you take a personal loan at the same time as a home loan, as it is. The answer is that, yes, provided you can meet the general eligibility criteria for both a personal loan and a home loan, your application should be approved. Those eligibility criteria may include:

  • Higher-income to show repayment capability for both the loans
  • Clear credit history with no delays in bill payments or defaults on debts
  • Zero or minimal current outstanding debt
  • Some amount of savings
  • Proven rent history will be positively perceived by the lenders

A personal loan after or during a home loan may impact serviceability, however, as the numbers can seriously add up. Every loan you avail of increases your monthly installments and the amount you use to repay the personal loan will be considered to lower the money available for the repayment of your home loan.

As to whether you can get a personal loan after your home loan, the answer is a very likely "yes", though it does come with a caveat: as long as you can show sufficient income to repay both the loans on time, you should be able to get that personal loan approved. A personal loan can also help to improve your credit score showing financial discipline and responsibility, which may benefit you with more favorable terms for your home loan.

How much can I borrow with a guaranteed home loan?

Some lenders will allow you to borrow 100 per cent of the value of the property with a guaranteed home loan. For that to happen, the lender would have to feel confident in your ability to pay off the mortgage and in the security provided by your guarantor.

How do I know if I have to pay LMI?

Each lender has its own policies, but as a general rule you will have to pay lender’s mortgage insurance (LMI) if your loan-to-value ratio (LVR) exceeds 80 per cent. This applies whether you’re taking out a new home loan or you’re refinancing.

If you’re looking to buy a property, you can use this LMI calculator to work out how much you’re likely to be charged in LMI.

Remaining loan term

The length of time it will take to pay off your current home loan, based on the currently-entered mortgage balance, monthly repayment and interest rate.

Monthly Repayment

Your current monthly home loan repayment. To accurately calculate how much you could save, an accurate payment figure is required. If you are not certain, check your bank statement.

How much of a deposit do I need for a home loan from the Commonwealth bank?

The minimum deposit the Commonwealth Bank usually accepts is 10 percent of the amount you wish to borrow. However, a deposit of at least 20 percent of the amount you’re borrowing is needed if you wish to avoid Lenders Mortgage Insurance (LMI). LMI is charged for smaller deposits to give the lender extra recourse if the borrower fails to repay their loan. 

As an alternative to LMI, some borrowers with smaller deposits may opt to pay the Commonwealth Bank’s low deposit premium fee. It is a one-time, non-refundable charge that is added to a low-deposit home loan.

The deposit and the loan amounts are used to determine the LDP -, the higher the deposit, the lower is this cost. 

When calculating how much you need to save, don’t forget to factor in other expenses like stamp duty, insurance, legal fees, and moving costs.

How do I take out a low-deposit home loan?

If you want to take out a low-deposit home loan, it might be a good idea to consult a mortgage broker who can give you professional financial advice and organise the mortgage for you.

Another way to take out a low-deposit home loan is to do your own research with a comparison website like RateCity. Once you’ve identified your preferred mortgage, you can apply through RateCity or go direct to the lender.

What is a credit limit?

The maximum amount that can be borrowed from a lender, as per the home loan contract.

What is Lender's Mortgage Insurance (LMI)

Lender’s Mortgage Insurance (LMI) is an insurance policy, which protects your bank if you default on the loan (i.e. stop paying your loan). While the bank takes out the policy, you pay the premium. Generally you can ‘capitalise’ the premium – meaning that instead of paying it upfront in one hit, you roll it into the total amount you owe, and it becomes part of your regular mortgage repayments.

This additional cost is typically required when you have less than 20 per cent savings, or a loan with an LVR of 80 per cent or higher, and it can run into thousands of dollars. The policy is not transferrable, so if you sell and buy a new house with less than 20 per cent equity, then you’ll be required to foot the bill again, even if you borrow with the same lender.

Some lenders, such as the Commonwealth Bank, charge customers with a small deposit a Low Deposit Premium or LDP instead of LMI. The cost of the premium is included in your loan so you pay it off over time.

How can I get ANZ home loan pre-approval?

Shopping for a new home is an exciting experience and getting a pre-approval on the loan may give you the peace of mind that you are looking at properties within your budget. 

At the time of applying for the ANZ Bank home loan pre-approval, you will be required to provide proof of employment and income, along with records of your savings and debts.

An ANZ home loan pre-approval time frame is usually up to three months. However, being pre-approved doesn’t necessarily mean you will get your home loan. Other factors could lead to your home loan application being rejected, even with a prior pre-approval. Some factors include the property evaluation not meeting the bank’s criteria or a change in your financial circumstances.

You can make an application for ANZ home loan pre-approval online or call on 1800100641 Mon-Fri 8.00 am to 8.00 pm (AEST).

Interest Rate

Your current home loan interest rate. To accurately calculate how much you could save, an accurate interest figure is required. If you are not certain, check your bank statement or log into your mortgage account.