Home News How to qualify for a high LVR loan

How to qualify for a high LVR loan

Font size :
Nila Sweeney
Do you have a high enough income to service a home or investment property loan, but you don't have much of a deposit? We show you to qualify for a high LVR loan in the current market.
It was only a few years ago that borrowers could routinely qualify for 100% loans, or even 105% loans, without too much hassle. But the GFC has changed the game, and these days lenders are much more careful about the amount of money they dish out to borrowers.
According to Smartline Personal Mortgage Adviser Odette Shahnazari, in the current loan market some lenders will offer as much as 95% of the purchase price, meaning they will accept as little as 5% deposit.
“However, most require a 10% deposit, as well as sufficient funds to cover stamp duty and other costs such as the establishment fee, valuation fee and legal fees,” she says.
“For borrowings more than 80% of the value of the property, the borrower will also have to pay a one-off ‘Lenders Mortgage Insurance’ (LMI) premium to cover/protect the lender, if they default on their loan.”
In order to qualify for a high LVR loan, you need to reassure your bank or lender that you constitute a ‘good credit risk’. This means you have to show them that you’re a reliable, trust-worthy loan candidate with a good job and solid debt repayment history.
You also need to qualify for LMI, and in order to access this, “the lender needs to be satisfied that the borrowers’ 5% deposit is their own genuine savings over a minimum of six months,” Shahnazari says. “This needs to be confirmed through original bank statements.”
Some lenders will accept three months worth of genuine savings, so it’s worthwhile checking with you lender before you apply.
Either way, you need to start getting your finances in order at least 3-6 months prior to applying for a loan, so you can demonstrate a good savings history.
“A good start to any wealth creation plan is to have a ‘budget planner’ and a ‘savings plan’,” Shahnazari explains.
“A budget planner can help cut down the unnecessary expenses, and a good savings plan should see you put a decent chunk of your income – at least 10% – in a high-interest savings account.”
Some homebuyers are lucky enough to be gifted a deposit, and in this situation it’s important that you handle the money responsibly in the eyes of your lender.  
“Most banks require the gifted funds to be in the borrowers’ account for a minimum of three months, and the family member providing the gift will be required to complete a Statutory Declaration to confirm the gift is ‘unconditional’ and the borrower is not required to repay the money,” Shahnazari says.
“Also, even if the borrower receives a gift from a relative, they still need to provide evidence of their own genuine savings.”
Finally, for those buyers who are in a good repayment affordability position, but do not have any genuine savings to offer as a deposit, a ‘Family Guarantee’ may be an option.
“This is where family, usually parents, offer their house as security. It is generally done as a ‘Limited Guarantee’ where the parents guarantee 20% of the loan so that the LVR remains 80% or lower,” Shahnazari says.
“It’s not a bad way to save thousands of dollars in LMI. A prime candidate could be a young couple who has recently graduated from university and is earning a high income, but they haven’t been employed long enough to save the minimum deposit.”
Shahnazari warns that not all lenders offer a Family Guarantee, and the ones that do have very different policies, so you’ll need to discuss your options with your lender or mortgage broker.

It can be confusing to know whether to get a variable rate or fixed rate mortgage, and what features are important. That's why it's important to not only check the right rates, but make sure that you're getting the right features in your home loan. Get help choosing the right home loan

Mortgage News and Articles

House prices return to more affordable levels in mining towns House prices return to more affordable levels in mining towns

While the end of the mining boom caused property prices to collapse, on the plus side, homes are more affordable again Read more

Borrowers should anticipate a possible rate hike Borrowers should anticipate a possible rate hike Some experts advise borrowers to look for a fixed loan that allows extra repayments so that they can whittle down the balance sooner ... Read more

Why choosing the right mortgage is hard for first-home buyers Why choosing the right mortgage is hard for first-home buyers Many feel overwhelmed by the sheer range of products and interest rates on offer, a new survey reveals ... Read more

Mortgage applications drop in second quarter Mortgage applications drop in second quarter This marks the “beginning” of a downward trend, says Equifax executive ... Read more

More mortgage news and articles

Sponsored Links

Wednesday, Jul 26, 2017
Top Featured Rates
Top Bank Rates

Get help choosing the right home loan

Whether you're a first homebuyer, looking to refinance, or investing, it's important to have the right loan for your needs. Just fill in a few details below and one of our trusted mortgage advisers will contact you.

A quick & easy way to find the right home loan
  • Purpose of mortgage
  • Household Income
  • How much do you want to borrow?
  • How much deposit do you have?
  • How much is your house worth?
  • How much do you still owe on your mortgage?
  • What type of mortgage do you have?

  • How much is your new home?
  • How much do you want to borrow?
  • How soon do you want a mortgage?
  • First name
  • Last name
  • Where do you live?
  • Phone number

Special Offers

Related Keywords