97% LVR Home Loans

Finding enough money for a deposit can be hard, but did you know that you can pay much less with a 97% LVR home loan?

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, updated on August 8th, 2023       

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Traditionally people would need to pay 10% – 15% of a property’s value to secure a home loan. With median dwelling prices in Australia being at about $550,000 means you would need between $55,000 and $82,500 to secure a deposit on a house.

But did you know that you can get a deposit for as little as 3% of a property’s value? This is called a 97% LVR (Loan to Value Ratio) home loan and is available through a range of different lenders Australia wide.

What does a 97% LVR loan get me?

A 97% LVR home loan can save you a large amount of money on a deposit for a home. At the median Australian dwelling price of $550,000 you would be able to get a deposit of $16,500, saving you between $38,500 and $66,000 from the LVR levels of 90% and 85% stated earlier.

How can I get a 97% LVR home loan?

To receive a 97% LVR home loan, you will need to prove your ability to be able to make the repayments on your home loan as they come. This is done through a variety of different ways. If all of these different aspects of your financial history are favourable, you will likely be successful in applying for a 97% LVR home loan.

  • You must have a strong enough level of income enough to cover your new home loan repayments and existing costs, such as living costs and any other existing debts.
  • You must have a strong employment history and working in a stable job for at least 6 months prior to your application should be adequate.
  • You must have a good credit history ensuring all your bills are paid on time and to the full amount.
  • Basic levels of debt are okay such as limited credit card debt. However, the lesser the better.
  • You will need genuine savings. Not all lenders have a genuine savings requirement but most will.

What’s the catch?

While a 97% LVR home loan could mean considerable savings on a deposit, there are some draw backs to this type of loan.

For example, interest rate levels will likely be slightly higher than normal because of the higher loan amount and also the higher risk associated with this level of LVR. This will translate to a larger total repayment than you would see on a home loan at 80% or even 90% LVR.

Also, when paying a deposit that is over the 80% LVR mark, borrowers will usually have to pay something called Lender’s Mortgage Insurance (LMI). LMI is a payment that can be made either upfront or be placed on top of your home loan. It exists to cover lenders in the event that you are no longer able to make your home loan repayments.

How much can LMI cost me with a 97% LVR home loan?

The rate of LMI will rise with your level of LVR as well as with the price of the property you are looking to purchase. Take for example these LMI rates at different LVR levels and property prices.

Property Price 97% LVR LMI payment 85% LVR LMI payment
$350,000
$10,732
$5,067
$550,000
$21,179
$8,003
$750,000
$29,679
$15,140

The pros and cons of a 97% LVR home loan

PROS

Secure a home loan with a deposit of only 3% of your chosen property’s value.

Be eligible for banking products such as offset accounts and redraw facilities.

Allows you to get into your property sooner, rather than taking more time to save up for a deposit at a lower LVR%.

CONS

You will need to pay considerably more on LMI than you would with lower LVR levels.

Your home loan repayments will have higher interest rates, meaning you will pay considerably more over the full term of the loan.

Your finances (debt levels, credit history, living costs, income levels and employment history) will be closer scrutinised than it would for a home loan with less LVR.

You will have less lender options than you would for a home loan with less LVR.

Want to know more about 97% LVR home loans?

If I have a bad credit history can I still get a 97% LVR home loan?

If you have bad credit you will still be able to receive a 97% LVR home loan in some cases. To do so, you will need strong income levels, solid employment history and low current debt levels.

A successful applicant for this type of home loan with bad credit will often see higher interest rates than someone with average or good credit levels.

What is genuine savings?

Genuine savings is when you can prove that you have held an amount of money in your bank account for over three months. The amount of genuine savings needed to be successful in a home loan application will usually be 5%.

 

How do I find the best LMI price?

LMI rates are not usually advertised by lenders so it is best to ask different lenders about what LMI rates that they charge. These rates usually won’t differ considerably but even a 0.001% difference could mean hundreds or even thousands of dollars.

Can I get a 97% LVR home loan for an investment property?

You should be able to get a 97% LVR home loan to buy an investment property. This could be a good option because of the low deposit needed. 

Do particular properties suit these home loans better?

Properties within metropolitan areas or popular suburbs with quick resell potential will make lenders more inclined to give you 97% LVR.

How can I work out how much I will need to repay on my home loan overall?

First of all, you will need to work out how much you will be borrowing from your lender on your 97% LVR home loan.

Next, you can go to Savvy’s home loan repayment calculator to get an estimate of the amount you will pay in each repayment period and over the life of your loan term.

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