RateCity.com.au
powering smart financial decisions

Find and compare 95% LVR home loans

TMD

Showing home loans based on a loan of
$
with a deposit of

Embed

What is a 95% LVR home loan?

A 95 per cent LVR home loan is a type of low-deposit home loan where you are only required to put 5 per cent of the total purchase price towards a deposit.

‘LVR’ is an acronym for 'loan-to-value ratio' or 'loan to valuation ratio', which refers to the loan amount you are borrowing, represented as a percentage of the property's value. When a lender looks at how much you want to borrow in your loan application, they will compare their own valuation of the property to how much of a deposit you can put down.

Many standard home loans in Australia have an 80 per cent LVR, meaning they require a 20 per cent deposit. There are other types of home loans available for owner occupiers and investors, including 70 per cent LVR home loans that require a 30 per cent deposit, 90 per cent LVR home loans that require a 10 per cent deposit, and 95 per cent LVR home loans that require a 5 per cent deposit.

For example:

If Leigh wants to buy a new home with a property price of $500,000, but only has $25,000 of savings available as a deposit, then their deposit would cover only 5 per cent of the property's value. To buy the property, they would require a mortgage covering the remaining 95 per cent of the property's value - a 95% LVR home loan.

How low can a low deposit home loan go?

Any mortgage offer with an LVR higher than 80 per cent can generally be considered a low deposit home loan. A 5 per cent deposit may be the lowest deposit you will commonly encounter.

It may still be possible to buy property with a deposit smaller than 5 per cent, though you’ll likely require assistance from a guarantor and/or from government support programs.

Can I buy a property with a 5% deposit?

While most home loans expect a deposit of at least 20 per cent of the property value, it is possible to get a mortgage with just a 5 per cent deposit.

A variety of Australian mortgage lenders offer home loan options for borrowers with smaller deposits, which could allow you to enter the property market sooner and with less savings. These mortgage offers are often called 95 per cent LVR home loans, as you’ll have a Loan-to-Value Ratio of 95 per cent.

It’s important to remember that having a smaller deposit may still mean paying extra costs. Buying a property with a 5 per cent deposit may mean paying more in Lender’s Mortgage Insurance (LMI), and the interest rate you're offered may be higher than if you had a deposit of 20 per cent or more.

However, seeking out assistance from a guarantor and/or from government support programs may be able to help you buy a home with a low deposit without paying too much in extra costs.

What is a guarantor home loan?

Your parents or other relatives may be able to guarantee your home loan with the value of their own property. This may allow you to get a mortgage while paying low or no deposit, and without having to pay for LMI. 

Your guarantor may become responsible for paying your mortgage if you default on your repayments, so it's important that everyone is aware of the risks and responsibilities involved. 

Once you’ve held your mortgage for some time and have had a chance to build up some equity, you may be able to refinance your mortgage and remove the guarantee.

What are the benefits of 95% LVR home loans?

Some of the potential advantages for borrowers taking out a 95 per cent LVR home loan include:

  • Entering the property market quickly: Because you only need a 5 per cent deposit, you can take out a loan and buy a home faster than waiting to save up the standard 20 per cent deposit of genuine savings.
  • Easing short-term financial pressures: If you want to buy a home but saving a lump sum for a deposit isn’t feasible in the short term, a 95 per cent LVR home loan could temporarily relieve some of the financial burden.
  • Taking advantage of low interest rates: You could be able to enter the property market when favourable interest rates are available even if you don’t yet have enough money saved for a standard 20 per cent deposit.

What are the risks of 95% LVR home loans?

There are a few important risks to consider when looking for a mortgage with a 5 per cent deposit:

  • Lender's Mortgage Insurance (LMI): LMI is an insurance policy required by most lenders if a borrower has a deposit of less than 20 per cent. It covers the lender (and not the borrower) if the borrower defaults on their home loan repayments. Most lenders pass on the cost of LMI to the borrower. This can potentially add tens of thousands of dollars to your home loan's upfront costs - the higher the LVR, the more you may need to pay for LMI. 
  • Fewer home loan options: Not every lender offers 95 per cent LVR home loans, as most lenders consider these loans riskier than mortgages with LVRs of 80 per cent or lower. You may have fewer mortgage lenders to choose from if you have a low home loan deposit.
  • Higher interest rates and/or fees: Generally, the higher your LVR, the higher the interest rate and/or fees you may have to pay on your mortgage. This is because lenders often consider these loans riskier than lower LVR mortgages.

Home loan deposit size benefits and risks

 Deposit size

Benefits 

Risks 

20%+

More likely to be approved for a mortgage and be offered a more competitive rate

Avoid paying LMI

May take longer to save up if buying in capital city 
10-15%

Some mortgages are available

Get a foot on the property ladder without waiting years to save for a bigger deposit

Strict lending criteria applies

Borrower will pay LMI

5-10%

Some mortgages may be available

May qualify for First Home Loan Deposit Scheme

Strict lending criteria applies

Borrower will pay LMI (if not on FHLDS)

Higher ongoing repayments

2%If single parent – may qualify for Family Home Guarantee

Only possible through FHG

Strict lending criteria applies

Higher ongoing repayments

0%May be possible with guarantor or using equity in existing property.No 100% LVR home loans on RateCity database if not using guarantor.

What other features should I look for in a 95% LVR home loan?

Home loans with a 95 per cent LVR typically have similar features to other types of home loans, but the associated rates and fees may differ. For example, a lender might choose to offer a lower interest rate to customers who can put down a larger deposit.

Aside from the interest rate and deposit amount, though, here are some of the other common features to consider:

  • Fixed rate or variable rate home loan: You can usually decide whether to lock in an interest rate for a set period or have a variable interest rate. Remember to also check the comparison rate, which indicates the loan's overall cost, including interest and standard fees and charges.
  • Repayment options: Some lenders will allow you to make additional repayments above the minimum, so you can pay off your loan faster and avoid interest.
  • Redraw facility: Some home loans come with the option to redraw additional repayments you’ve made if you need the money down the track.
  • Offset account: You may be able to have a bank account linked to your home loan, known as an ‘offset account’. Your lender attributes your account balance towards your loan so you only have to pay interest on the difference.
  • Loan term: Usually, the term for a home loan is 25-30 years.

What government assistance could I get to gain a first home?

There are also options available to receive additional support when applying for a low deposit home loan, such as:

  • First home owners grants (FHOGs): Eligible first home buyers may be able to apply for a grant to go towards the deposit on their first home. Contact your state or territory government for more information, including the eligibility requirements. 
  • First home loan deposit scheme (FHLDS): This Australian government program from the National Housing Finance and Investment Corporation (NHFIC) allows first home buyers to purchase a property with a mortgage from a participating lender with a deposit of just 5 per cent, without having to pay for LMI. A limited number of scheme places are available each financial year, and both the borrowers and the property being purchased will need to satisfy eligibility criteria, such as property price thresholds. 
  • First Home Super Saver Scheme (FHSSS):This program allows you to make extra contributions to your superannuation fund and withdraw up to $10,000 ($20,000 for couples) of these extra contributions to go towards your home loan deposit.

Can you get a no deposit 100% LVR home loan?

In the past, it was possible to get a 100 per cent LVR home loan, also known as a no deposit home loan. However, ever since the Global Financial Crisis (GFC), no deposit home loans have become much rarer, with most banks and mortgage lenders no longer offering them.

It may still be possible to buy a property while paying no deposit. However, you may need the help of a family guarantor to guarantee your loan with the value of their own equity. Government support programs may also be able to contribute towards your deposit and/or help to guarantee your low deposit loan so you won’t have to pay for LMI.

Can a broker help you get a no deposit home loan?

Whether you’re buying your first home or an investment property, it’s handy to have help available before you enquire about a 95 per cent LVR home loan. 

Mortgage brokers are home loan experts that may be able to help you work out which mortgage lenders offer home loans that may suit your needs, that are available with a 5 per cent deposit. They can also manage your home loan application and help you access grants and other support services to make your buying journey easier. 

You can quickly compare mortgage brokers in your area at RateCity, so you can take advantage of their experience and local knowledge. 

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).

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.

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.

This article was reviewed by Personal Finance Editor Alex Ritchie before it was published as part of RateCity's Fact Check process.