95% Home Loans

Do you want to purchase a home sooner? You can with a deposit as low as 5% in Australia. Find out how you can.

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, updated on August 8th, 2023       

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It’s possible to get 95% home loans in Australia. That means you can borrow up to 95% of your property’s value as a low deposit home loan. This article explains how you can do that.

How do 95% home loans differ from standard home loans?​

The fundamental difference is the deposit amount you need to provide. Standard mortgages in Australia usually require a deposit of at least 20% of the value of your home. 95% home loans on the other hand only require you to provide a deposit of 5%.

The table below shows you the difference in deposit requirements for a range of home values.

Home value Minimum deposit required for a standard home loan Deposit required for a 95% home loan
$350,000
$70,000
$17,500
$450,000
$90,000
$22,500
$550,000
$110,000
$27,500
$650,000
$130,000
$32,500
$750,000
$150,000
$37,500
$850,000
$170,000
$42,500

As you can see, the lower deposit requirement makes a big difference.

However, lenders view 95% home loans as higher risk. They usually have higher interest rates than standard mortgages. They also usually require you to take out lenders’ mortgage insurance (LMI). You don’t need LMI with a standard home loan.

What is (LMI)?

LMI is insurance for lenders that borrowers pay for. If you default on your mortgage repayments, LMI covers the lender. Unlike other forms of insurance (like car or income protection), it is a one-off cost.

However, it’s a significant one-off cost. For example, it can be well over $10,000 on a mortgage of $500,000. The exact amount depends on the amount you borrow, the LMI provider and your loan-to-value ratio (LVR).

Your LVR is your mortgage expressed as a percentage of your home’s value. Your LVR on a 95% home loan is 95%.

The cost of LMI is usually added to the amount you borrow. Although this means that you don’t have to pay LMI upfront, you will pay interest on its cost. It’s important to understand that.

Are 95% home loans easy to get?

They have generally become more difficult to get in Australia in recent years. Many lenders have become more risk averse for two major reasons.

  • Tighter lending restrictions were introduced after the global financial crisis (GFC) in the National Consumer Credit Protection Act.
  • The Australian economy went into recession in 2020.

Not all lenders offer 95% home loans. However, it’s still possible to get them from selected banks, credit unions, building societies and other non-bank lenders.

Can first home buyers get 95% home loans?

Yes, if you meet a lender’s criteria, you can get your application approved.

However, if you’re  buying your first home, it’s important to be aware of government schemes that can boost your deposit. They include the First Home Owner Grant (FHOG) and the First Home Loan Deposit Scheme (FHLDS).

All Australian States and Territories except the ACT offer the FHOG. However, the amounts and eligibility criteria vary.  You can use the FHOG for your deposit.     

The FHLDS helps eligible first home buyers across Australia to avoid the cost of LMI. If you have a 5% deposit, the government provides a lender guarantee of 15% of the value of your home. This reduces the lender’s risk and removes the need for LMI.

Simple steps before applying for a 95% home loan​

Top tips for getting the best 95% home loan​

Shop around

The Australian mortgage market is highly competitive. Make sure you shop around to get the best finance for your specific needs. Use the services of a mortgage broker if you don’t have the time or knowledge to do it yourself.

Shortlist loans with the features you need

Think about whether you will need optional features like offset accounts and redraw facilities. There are usually fees for these features, so only include them if you’ll use them.

Choose the loan with the lowest comparison rate

The comparison rate includes the cost of interest plus any other fees or charges. Lenders in Australia are legally required to tell you the comparison rate before you take out a loan.

What else you need to know about 95% home loans

Can I get a 95% home loan with bad credit?

It’s extremely unlikely. You’ll usually have to come up with a 20% deposit for a bad credit home loan instead. 

Can you get ‘no deposit’ home loans in Australia?

Yes, it is possible to get a 100% home loan but it’s more difficult. You’ll be asked to provide a suitable guarantor. This is a person who agrees to become legally liable for paying your loan if you don’t make your repayments.

What is a loan serviceability ratio?

This is a ratio that your lender calculates when assessing your application. They look at your income, expenses and how much money you have left over for your repayments.

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