What are low deposit home Loans?

In simple words  “Low Deposit home loans” are which are provided by lenders when a client contributes less than 20% deposit. Most of the low deposit  home loans are when only 5% deposit is contributes towards the loan amount to be borrowed.

In mortgage world these  Low deposit loans are called  high LVR home loans. LVR stands for Loan to Value ratio

Banks prefer clients who pay 20% deposit. Any loan which has less than 20% deposit incur LMI(Lender Mortgage Insurance). Therefore, all the loans with LMI are considered in the risk zone within the banks.

There are few categories of low deposit home loans:

• 3 to 5% Deposit

• 5 to 10% Deposit

• 10 to 15% Deposit

• 15 to 19% Deposit

Do you qualify for low deposit home loans?

Why would banks prefer a client with a low deposit?

Certainly, banks intend to be risk-free as they are lending money. Well, the lenders can consider if

• Good income history: If you have a good income and good employment history, then the only reason you lagging behind is a lack of savings.lenders can consider that and do their assessment based on your income. These assessments are also known as serviceability tests.

• Purpose of Loan: It also depends on the category and purpose you applying for. If you are renting at the moment and after buying a property to live in, your mortgage repayments are pretty much similar, then there are not many risk factors involved.

• Property Location: The banks have postcode restrictions on the properties they want to finance. Some regional areas, mining towns, and specific suburbs are considered as high-risk areas.

• Property type: Some property types such as high rise apartments, inner city apartments, less than 50 sqm apartments, and display home does not suit all the lenders.

• Credit history: When you are paying a low deposit, your credit history is very crucial. A bank is offering you a higher amount of loan on the property and they can’t take any risk. Clean and clear credit history is required.

• Genuine savings: What are genuine savings. Genuine savings for a specific amount is the lowest amount to have remained into your account for the last 3 months. Banks usually ask for genuine savings if you have a less than 20% deposit. Not all the lenders ask for genuine savings if the deposit is 10 to 20%. Luckily there are still few lenders who do not ask for genuine savings as long you have been paying rent regularly.

• Asset portfolio: The bank may consider you as a genuine client for low deposit home loan if you own assets like cars, jewelry, antiques or other valuables.

• Period of employment: The period of employment with the current employer has a good impact on lenders. The employment history in the same field and more than 6 months with the same employer can provide confidence to the lender to give you a loan on a low deposit.

• Liabilities: A client with a huge car loan, credit card, ZIP pay and some other repayments on board will definitely have a hard time to go through on a low deposit loan. Too many unnecessary debts reduce the serviceability on the loan. The UBER eats, Deliveroo and ZIP PAY installments can have negative impacts on a borrowing power as these may be added in regular expenses.

Banks prefer a bigger deposit but not all the clients can wait till they have reached that specific amount. In cities like Sydney, where the median house price is over $580K, it takes time to save a big deposit.

If you have a low deposit, we will get you the lender on competitive interest rates. Contact Us Now

Get low deposit loans

As discussed above, you can have low deposit loans, low-income loans, bad credit history loans but it is hard to get all these loans at once.

Low deposit loans are the reality and as long the employment status is excellent and credit history is clean, we can manage to get approval.

Please note that all low LVR loans do incur an LMI as discussed. However, if we choose government-backed lenders such as Keystart in Western Australia, then we can be exempted from LMI. the interest rates with Keystart are higher than the other lenders.

Please share your scenario with us and we will connect you with the right lender.

Why all lenders don't offer low deposit home loans?

Banks try to play safe and keep margin money in their hands. If a client doesn’t pay installment then the bank can sell the house and repay their loan. If a low deposit is paid then banks are unable to retrieve all their loan amount and hence consider them as a high risk.

Only non-bank lenders offer their products on a less deposit because:

• They have low requirements.

• They are a competition to banks

• They have a low cost of operating loans and recovery.

• They take more risks than banks in order to survive.