You might be closer to buying a house than you think

You might be closer to buying a house than you think

Housing affordability is one of the key issues of this election, yet it’s actually becoming easier to enter the property market in much of Australia.

Of course, ‘easier’ doesn’t mean ‘easy’. It’s still tough to save a deposit.

But as new statistics from Domain show, house prices fell in Sydney, Melbourne, Brisbane, Perth and Canberra during the year to March.

If you live in those cities, and you want to enter the market with just a 5 per cent deposit, home ownership might be closer than you think.

A lot of borrowers don’t realise it’s possible to buy a home with such a small deposit – yet there are actually more than 75 lenders that allow home buyers to borrow up to 95 per cent of the value of their property, according to a RateCity comparison search.

Who offers 95% mortgages?

Australia’s 10 biggest home loan lenders allow borrowers to take out mortgages with as little as a 5% deposit. They are Commonwealth Bank, Westpac, NAB, ANZ, ING, Suncorp Bank, Bendigo & Adelaide Bank, Macquarie Bank, Bank of Queensland and ME Bank.

How much of a deposit you need in each capital city

Here’s how much you’d need to save if you wanted to put down a 5 per cent deposit and buy a house valued at your capital city’s median price:

City Median house price Prices trending… 5% deposit
Sydney $1,027,962 Down $51,398
Melbourne $809,468 Down $40,473
Brisbane $563,666 Down $28,183
Perth $529,997 Down $26,500
Adelaide $542,474 Up $27,124
Hobart $478,247 Up $23,912
Canberra $722,440 Down $36,122
Darwin $514,546 Up $25,727

Which other banks offer 95% home loans?

A wide range of other banks offer 95% mortgages, including Auswide Bank, Bank Australia, Bank of Melbourne, BankSA, Bankwest, Gateway Bank, Greater Bank, Heritage Bank, IMB Bank, MyState Bank, P&N Bank, Qudos Bank, St George Bank, Regional Australia Bank and Teachers Mutual Bank.

Here’s how much you’d need to save if you wanted to put down a 5 per cent deposit and buy a unit valued at your capital city’s median price:

City Median unit price Prices trending… 5% deposit
Sydney $696,935 Down $34,847
Melbourne $466,892 Down $23,345
Brisbane $372,852 Down $18,643
Perth $347,596 Down $17,380
Adelaide $312,459 Down $15,623
Hobart $363,418 Up $18,171
Canberra $426,719 Down $21,336
Darwin $313,462 Down $15,673

Which credit unions allow 5% deposits?

Various credit unions allow 5% deposits, including BCU, Community First Credit Union, Credit Union SA, CUA, Family First Credit Union, Horizon Credit Union, Illawarra Credit Union, Macquarie Credit Union, Northern Inland Credit Union, People’s Choice Credit Union, Queenslander Country Credit Union, Queenslanders Credit Union, Southern Cross Credit Union, Summerland Credit Union and Transport Mutual Credit Union.

But wait, there’s more (costs)

If you think that buying a property with just a 5 per cent deposit seems too good to be true – well, it kind of is.

That’s because you’ll have to pay some other costs as well.

First, your lender will almost certainly make you pay lender’s mortgage insurance (LMI), which usually applies when your deposit is less than 20 per cent. LMI is an insurance policy designed to protect the lender (not the borrower) in case the borrower defaults on the mortgage. If you’re a first home buyer, and you put down a 5 per cent deposit on a $500,000 property, you’ll have to pay an estimated $15,960 in LMI, according to Genworth.

Second, you might have to pay stamp duty. This is a state tax, so it varies from state to state. For example, a first home buyer who purchases a $500,000 house would be exempt from stamp duty in New South Wales, Victoria and Queensland, but would have to pay $21,330 in South Australia.

Third, you’ll have to pay for conveyancing, which will set you back about $1,500.

Finally, you might choose to get a building and pest report, which would cost about $1,000.

Which non-bank lenders allow 95% LVR home loans?

You can also get mortgages with a loan-to-value ratio of 95 per cent through non-bank lenders such as AFM, Aussie, Australian Financial, Freedom Lend, iMortgage, Kogan Money, Liberty, Mortgage House, Pepper Money, RAMS, Resi, Resimac, State Custodians, Virgin Money and Yellow Brick Road.

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What do people do with a Macquarie Bank reverse?

There are a number of ways people use a Macquarie Bank reverse mortgage. Below are some reasons borrowers tend to release their home’s equity via a reverse mortgage:

  • To top up superannuation or pension income to pay for monthly bills;
  • To consolidate and repay high-interest debt like credit cards or personal loans;
  • To fund renovations, repairs or upgrades to their home
  • To help your children or grandkids through financial difficulties. 

While there are no limitations on how you can use a Macquarie reverse mortgage loan, a reverse mortgage is not right for all borrowers. Reverse mortgages compound the interest, which means you end up paying interest on your interest. They can also affect your entitlement to things like the pension It’s important to think carefully, read up and speak with your family before you apply for a reverse mortgage.

When does Commonwealth Bank charge an early exit fee?

When you take out a fixed interest home loan with the Commonwealth Bank, you’re able to lock the interest for a particular period. If the rates change during this period, your repayments remain unchanged. If you break the loan during the fixed interest period, you’ll have to pay the Commonwealth Bank home loan early exit fee and an administrative fee.

The Early Repayment Adjustment (ERA) and Administrative fees are applicable in the following instances:

  • If you switch your loan from fixed interest to variable rate
  • When you apply for a top-up home loan
  • If you repay over and above the annual threshold limit, which is $10,000 per year during the fixed interest period
  • When you prepay the entire outstanding loan balance before the end of the fixed interest duration.

The fee calculation depends on the interest rates, the amount you’ve repaid and the loan size. You can contact the lender to understand more about what you may have to pay. 

Cash or mortgage – which is more suitable to buy an investment property?

Deciding whether to buy an investment property with cash or a mortgage is a matter or personal choice and will often depend on your financial situation. Using cash may seem logical if you have the money in reserve and it can allow you to later use the equity in your home. However, there may be other factors to think about, such as whether there are other debts to pay down and whether it will tie up all of your spare cash. Again, it’s a personal choice and may be worth seeking personal advice.

A mortgage is a popular option for people who don’t have enough cash in the bank to pay for an investment property. Sometimes when you take out a mortgage you can offset your loan interest against the rental income you may earn. The rental income can also help to pay down the loan.

How is interest charged on a reverse mortgage from IMB Bank?

An IMB Bank reverse mortgage allows you to borrow against your home equity. You can draw down the loan amount as a lump sum, regular income stream, line of credit or a combination. The interest can either be fixed or variable. To understand the current rates, you can check the lender’s website.

No repayments are required as long as you live in the home. If you sell it or move to a senior living facility, the loan must be repaid in full. In some cases, this can also happen after you have died. Generally, the interest rates for reverse mortgages are higher than regular mortgage loans.

The interest is added to the loan amount and it is compounded. It means you’ll pay interest on the interest you accrue. Therefore, the longer you have the loan, the higher is the interest and the amount you’ll have to repay.

How to use the ME Bank reverse mortgage calculator?

You can access the equity in your home to help you fund your needs during your senior years. A ME Bank reverse mortgage allows you to tap into the equity you’ve built up in your home while you continue living in your house. You can also use the funds to pay for your move to a retirement home and repay the loan when you sell the property.

Generally, if you’re 60 years old, you can borrow up to 15 per cent of the property value. If you are older than 75 years, the amount you can access increases to up to 30 per cent. You can use a reverse mortgage calculator to know how much you can borrow.

To take out a ME Bank reverse mortgage, you’ll need to provide information like your age, type of property – house or an apartment, postcode, and the estimated market value of the property. The loan to value ratio (LVR) is calculated based on your age and the property’s value.

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.

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.

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 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.

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 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 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.

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.

How can I apply for a first home buyers loan with Commonwealth Bank?

Getting a home loan requires planning and research. If you are considering a home loan with the Commonwealth Bank, you can find the information you need in the buying your first home section of the bank’s website.

You can see the steps you should take before applying for the loan and use the calculators to work out how much you can borrow, what your monthly repayments would be and the upfront costs you’d likely pay.

You can also book a time with a Commonwealth first home loan specialist by calling 13 2221.

CommBank publishes a property report that may help you understand the real estate market. The bank has also created a CommBank Property App that you can use to search for property.  The link to download this app is available on the same webpage.

If you are eligible for the First Home Loan Deposit Scheme, CommBank will help you process your application. The scheme helps first home buyers to purchase a home with a low deposit. You can read details about this scheme here and speak with a CommBank home lending specialist to understand your options.