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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.

Fact Check Verification

The information on this page was fact checked by Tedjo Hadiwidjojo, a broker in Victoria specialising in home loans, go-between loans, commercial property loans, reverse mortgages, SMSF, asset finance, business finance, cash-flow finance, short term finance, personal loans, and non-conforming finance. For more information on how brokers like this can assist you, look for a broker near you

Frequently asked questions

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.

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 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 is a secured home loan?

When the lender creates a mortgage on your property, they’re offering you a secured home loan. It means you’re offering the property as security to the lender who holds this security against the risk of default or any delays in home loan repayments. Suppose you’re unable to repay the loan. In this case, the lender can take ownership of your property and sell it to recover any outstanding funds you owe. The lender retains this hold over your property until you repay the entire loan amount.

If you take out a secured home loan, you may be charged a lower interest rate. The amount you can borrow depends on the property’s value and the deposit you can pay upfront. Generally, lenders allow you to borrow between 80 per cent and 90 per cent of the property value as the loan. Often, you’ll need Lenders Mortgage Insurance (LMI) if the deposit is less than 20 per cent of the property value. Lenders will also do a property valuation to ensure you’re borrowing enough to cover the purchase. 

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.

How do I apply for a home improvement loan?

When you want to renovate your home, you may need to take out a loan to cover the costs. You could apply for a home improvement loan, which is a personal loan that you use to cover the costs of your home renovations. There is no difference between applying for this type of home improvement loan and applying for a standard personal loan. It would be best to check and compare the features, fees and details of the loan before applying. 

Besides taking out a home improvement loan, you could also:

  1. Use the equity in your house: Equity is the difference between your property’s value and the amount you still owe on your home loan. You may be able to access this equity by refinancing your home loan and then using it to finance your home improvement.  Speak with your lender or a mortgage broker about accessing your equity.
  2. Utilise the redraw facility of your home loan: Check whether the existing home loan has a redraw facility. A redraw facility allows you to access additional funds you’ve repaid into your home loan. Some lenders offer this on variable rate home loans but not on fixed. If this option is available to you, contact your lender to discuss how to access it.
  3. Apply for a construction loan: A construction loan is typically used when constructing a new property but can also be used as a home renovation loan. You may find that a construction loan is a suitable option as it enables you to draw funds as your renovation project progresses. You can compare construction home loans online or speak to a mortgage broker about taking out such a loan.
  4. Look into government grants: Check whether there are any government grants offered when you need the funds and whether you qualify. Initiatives like the HomeBuilder Grant were offered by the Federal Government for a limited period until April 2021. They could help fund your renovations either in full or just partially.  

Can you borrow the deposit for a home loan?

Most lenders will want the majority of your home loan deposit to be made up of ‘genuine savings’ which is income earned from your job. While a small number of lenders may let you use a personal loan or a credit card to help cover the cost of your deposit, this may potentially cost you more in interest, and put your finances at higher risk.

If you haven’t saved a full deposit, it may be possible to effectively borrow the deposit for a mortgage with the help of a guarantor. This is usually a parent of other family member who guarantees your mortgage with the equity in their own property.

It may also be possible to borrow the money for a home loan deposit from a family member (e.g. the Bank of Mum & Dad) or a friend, provided you draw up a formal legal agreement to pay this money back, showing your mortgage lender that you’re taking responsibility.

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.

What is a home loan?

A home loan is a finance product that allows a home buyer to borrow a large sum of money from a lender for the purchase of a residential property. The home is then put up as "security" or "collateral" on the loan, giving the lender the right to repossess the property in the case that the borrower fails to repay their loan.

Once you take out a home loan, you'll need to repay the amount borrowed, plus interest, in regular instalments over a predetermined period of time.

The interest you're charged on each mortgage repayment is based on your remaining loan amount, also known as your loan principal. The rate at which interest is charged on your home loan principal is expressed as a percentage.

Different home loan products charge different interest rates and fees, and offer a range of different features to suit a variety of buyers’ needs.

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.

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

Can I get a NAB first home loan?

The First Home Loan Deposit Scheme of NAB helps first home buyers purchase a property sooner by reducing the upfront costs required. This scheme is offered based on a Government-backed initiative, with10,000 available places announced in October 2020.

Suppose your application for the NAB first home buyer loan is successful. In that case, you’ll only need to pay a low deposit, between 5 and 20 per cent of the property value and won’t be asked to pay lender's mortgage insurance (LMI). You’ll also receive a limited guarantee from the Australian government to purchase the property.

If you’re applying for the NAB first home buyer home loan as an individual, you need to have earned less than $125,000 in the last financial year. Couples applying for the NAB first home loan need to have earned less than $200,000 to be eligible. To be considered a couple, you need to be married or in a de facto relationship. A parent and child, siblings or friends are not considered a couple when applying for a NAB first home loan.

The NAB First Home Loan Deposit Scheme is currently offered only to purchase a brand new property, rather than an established property.

What are the features of home loans for expats from Westpac?

If you’re an Australian citizen living and working abroad, you can borrow to buy a property in Australia. With a Westpac non-resident home loan, you can borrow up to 80 per cent of the property value to purchase a property whilst living overseas. The minimum loan amount for these loans is $25,000, with a maximum loan term of 30 years.

The interest rates and other fees for Westpac non-resident home loans are the same as regular home loans offered to borrowers living in Australia. You’ll have to submit proof of income, six-month bank statements, an employment letter, and your last two payslips. You may also be required to submit a copy of your passport and visa that shows you’re allowed to live and work abroad.

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.

How can I qualify for a joint home loan if my partner has bad credit?

As a couple, it's entirely possible that the credit scores of you and your partner could affect your financial future, especially if you apply for a joint home loan. When applying for a joint home loan, if one has bad credit, there may be steps that can help you to qualify even with bad credit, including:

  • Saving for a higher deposit, ideally 20 per cent or more. Keep in mind:  a borrowed amount of less than 80 per cent of the property value also saves the cost of Lender's Mortgage Insurance (LMI).
  • Consistent employment records, regular savings habits, and an economical lifestyle can help prove financial stability and responsibility. These can improve your chances of approval even if there are some negative marks on a credit report.
  • Delaying your decision to buy a property until your partner’s credit score improves. Alternatively, you may want to consider a solo application.

While these tips may assist, if you find this overwhelming, consider consulting an expert advisor who can offer personal guidance based on your financial situation.

When do mortgage payments start after settlement?

Generally speaking, your first mortgage payment falls due one month after the settlement date. However, this may vary based on your mortgage terms. You can check the exact date by contacting your lender.

Usually your settlement agent will meet the seller’s representatives to exchange documents at an agreed place and time. The balance purchase price is paid to the seller. The lender will register a mortgage against your title and give you the funds to purchase the new home.

Once the settlement process is complete, the lender allows you to draw down the loan. The loan amount is debited from your loan account. As soon as the settlement paperwork is sorted, you can collect the keys to your new home and work your way through the moving-in checklist.