After several years of enforcing tighter home loans Melbourne conditions, Australian lending institutions have finally released 95% home loans back onto the market – but, they come with a catch.
The Real Picture
95% home loans Melbourne are once again readily available, with the majority of the major lender’s offering this type of loan facility. There are some catches that you need to be aware of when you are looking to borrow over 90% LVR, however.
The major one here is that once you borrow more than 90% of the market value of the property, lender’s mortgage insurance (LMI) substantially increases. If you can keep your loan to less than 90% of the market value of the property, it will save you a considerable amount in lender’s mortgage insurance.
Let’s Get Into The Details
Consider this recent cautionary tale: a borrower was trying to buy a property for $660,000, with a cash deposit of $40,000. At an LVR of 94%, they were facing an LMI premium of a whopping $22,000! With a deposit of $66,000, however – which reduced the LVR to 10% – the LMI dropped by more than half, to around $10,000.
Also, if you have had a recorded default on your credit file, this will more than likely discount you from borrowing above 80% of the market value of the property.
What You Need To Know
If you’re planning to apply for a 95% home loans Melbourne, it’s important that you put forward an impeccable application. Common reasons why applications are declined are as follows:
- You have high credit card debts, personal loans etc.
- You have had numerous credit checks performed on your credit file
- You have had a default registered against your name
- Your time in your present employment is minimal OR
- You have recently changed jobs and you’re still on probation OR
- You have recently changed industries
What You Can Do
In order to increase the likelihood that you will be approved with a 95% loan, consider the following:
- Keep all of your payments up to date on your liabilities. This includes all of your monthly bills such as your mobile phone, car payments, credit cards and electricity bills.
- Look at minimising your credit card limits and reduce your personal debts where possible.
- Obtain a copy of your credit file. This will tell you how many credit enquiries and defaults you have against your name.
- Have a minimum of 5% of the purchase price of the property in genuine savings (ie. not a gift from a family member, but a genuine demonstration of your ability to save).