In years past, homebuyers had access to 100% loan-to-valuation or LVR ratio home loans relatively easily. These days, however, banks and lenders have requirements that are more stringent and have limited the LVR to what they are willing to offer borrowers on a case-to-case basis.
So if you want to take out a home loan and do not have the common 20% home deposit to offer banks and lenders, would it still be possible for you to obtain a high LVR mortgage to purchase a home? The answer would depend on several factors.
Working Out Home Much Home Deposit You Could Afford
Major banks and lenders are generally agreeable to fund up to 95% of home purchases considering that you could provide solid proof of income and savings. They will likewise take into account your loan amount.
Other lenders might also offer the same LVR, but would add 2% for capitalising LMI or lenders mortgage insurance, so you might obtain a 95% LVR home loan with an added 2% for the LMI.
For instance, for you to purchase that nice piece of real estate here in Burnside worth $350,000, you would need a 95% LVR mortgage of $332,500, which means that you would need to put down a home deposit of $17,500.
But if you add the LMI cost, which is $7,000, to your loan amount, your home loan total would be about 97% or $339,500.
Other Crucial Things to Consider
Home loan requirements and rules vary greatly from one bank or lender to another. It would be your personal financial circumstances that would determine how they would deal with you. The higher your home deposit, the less interest you would need to repay.
But this would also come down to your specific financial situation – your income, employment history, credit and savings to start.
Keep in mind though that while you cannot do anything about the fees and rates related to taking out a home loan, you could fix your finances and do your homework so you could increase your chances of approval for a home loan that would specifically suit your needs and could comfortably afford.