Securing a home loan is a significant step towards owning your dream home. For many, a 90% home loan is an attractive option, as it requires a smaller upfront deposit. But which banks actually offer these high-loan-to-value (LVR) mortgages? Let's dive into the details and explore your options.

Understanding 90% Home Loans

A 90% home loan means you're borrowing 90% of the property's value, and only paying 10% as a deposit. This can be a game-changer for first-time buyers or those who don't have a large amount saved. However, it's crucial to understand the implications. Generally, lenders view these loans as riskier, which often translates to higher interest rates and the requirement for Lender's Mortgage Insurance (LMI).

Lender's Mortgage Insurance (LMI) protects the lender if you default on your loan. It's a one-off premium that can add a significant amount to your upfront costs. Despite this, a 90% loan can be a great way to get into the property market sooner rather than later.

Before jumping in, it's essential to assess your financial situation. Can you comfortably afford the repayments, even if interest rates rise? Have you factored in other costs like stamp duty, legal fees, and building inspections? A comprehensive budget will give you a clear picture of your financial readiness. Seeking advice from a mortgage broker can also provide valuable insights and help you navigate the complexities of the mortgage landscape.

Banks Offering 90% Home Loans

Okay, let’s get down to brass tacks. Which banks are actually willing to lend you 90% of the property value? While specific offerings can change, several major and smaller lenders often provide this option. Keep in mind that eligibility criteria can vary significantly.

Major Banks

• Commonwealth Bank (CBA): As one of Australia's largest banks, CBA often offers 90% home loans, especially to first-time buyers. They usually have various packages and incentives to attract new customers. Their interest rates and fees can be competitive, but it's always wise to compare.
• Westpac: Westpac is another major player that provides 90% LVR loans. They have a range of home loan products to suit different needs. Keep an eye out for special promotions or discounts that can make their offer more attractive.
• National Australia Bank (NAB): NAB also participates in the 90% home loan market. They tend to focus on providing personalized service and tailored solutions. Their eligibility criteria may vary based on your employment history and credit score.
• ANZ: Rounding out the big four, ANZ offers 90% loans to eligible applicants. They are known for their comprehensive online resources and customer support. Be sure to check their current interest rates and compare them with other lenders.

Smaller Banks and Credit Unions

Beyond the major banks, smaller institutions like regional banks and credit unions can also be excellent options for a 90% home loan. These lenders often have a more flexible approach and may be willing to consider applications that don't fit the standard mold.

• Bendigo and Adelaide Bank: This bank often has competitive rates and a focus on customer service. They may be more willing to consider individual circumstances.
• Suncorp: Suncorp sometimes offers attractive deals on high-LVR loans, particularly for owner-occupiers. They also have a good reputation for customer satisfaction.
• Credit Unions: Various credit unions across Australia can provide 90% home loans. These institutions are often community-focused and may offer more personalized service. Examples include Beyond Bank and Heritage Bank.

Online Lenders

The rise of online lenders has added another dimension to the home loan market. These lenders often have streamlined application processes and competitive rates. However, it's essential to do your research and ensure they are reputable before proceeding.

• Tic:Toc: This online lender is known for its quick approval times and competitive rates. They specialize in simple, straightforward home loans.
• loans.com.au: Another online lender that offers a range of home loan products, including high-LVR options. They often have lower fees compared to traditional banks.

Factors Affecting Eligibility

So, you’re eyeing a 90% home loan? Great! But before you get too excited, understand that lenders don't just hand these out to anyone. They need to be convinced you're a safe bet. Here's what they'll be looking at:

Credit Score

Your credit score is like your financial report card. Lenders use it to gauge how well you've managed credit in the past. A high score tells them you're reliable and responsible, making you a less risky borrower. To improve your score, pay bills on time, reduce debt, and avoid applying for multiple credit products at once. You can obtain your credit report from agencies like Equifax, Experian, or illion.

Income and Employment

Lenders want to see that you have a stable and reliable income stream. They'll typically ask for payslips, tax returns, and bank statements to verify your earnings. If you're self-employed, be prepared to provide more detailed financial information, such as profit and loss statements. Job security is also a factor, so having a long-term employment history can boost your application.

Savings History

Even though you're only putting down a 10% deposit, lenders still want to see that you have a solid savings history. This shows that you're disciplined with your money and can manage your finances effectively. Regular deposits into your savings account are a good sign. Avoid large, unexplained withdrawals, as these can raise red flags.

Debt-to-Income Ratio

Your debt-to-income ratio (DTI) compares your monthly debt payments to your gross monthly income. Lenders use this to assess whether you can comfortably afford your mortgage repayments along with your other debts. A lower DTI is generally better, as it indicates you have more disposable income. To improve your DTI, consider paying off some of your existing debts before applying for a home loan.

LMI Requirements

As mentioned earlier, Lender's Mortgage Insurance (LMI) is a significant consideration with 90% home loans. LMI protects the lender if you default on your loan. The premium can be quite substantial, often thousands of dollars, and it's usually added to your loan amount. Some lenders may offer LMI waivers to certain professions, such as doctors or lawyers, so it's worth exploring your options.

Tips for Securing a 90% Home Loan

Okay, so you're serious about getting that 90% home loan? Here’s how to boost your chances:

• Get your finances in order: This means paying off debts, saving diligently, and creating a budget.
• Improve your credit score: Check your credit report and fix any errors. Pay bills on time and avoid maxing out credit cards.
• Shop around: Don't settle for the first offer you receive. Compare interest rates, fees, and features from multiple lenders.
• Consider a mortgage broker: A broker can help you navigate the complex world of home loans and find the best deal for your situation.
• Be prepared to negotiate: Don't be afraid to ask for a better interest rate or lower fees. Lenders are often willing to negotiate to win your business.

Navigating Interest Rates and Fees

When it comes to home loans, the interest rate is a crucial factor. Even a small difference can have a significant impact on your monthly repayments and the total cost of the loan over time. 90% home loans typically come with higher interest rates compared to loans with lower LVRs, as they are seen as riskier by lenders. It's essential to compare interest rates from different lenders and understand whether they are fixed, variable, or a combination of both.

Fixed vs. Variable Interest Rates

A fixed interest rate remains constant for a set period, usually one to five years. This provides certainty and protects you from potential interest rate increases. However, you may miss out if interest rates fall. A variable interest rate, on the other hand, fluctuates with market conditions. This means your repayments can go up or down. Variable rates often start lower than fixed rates, but they come with more uncertainty. Some lenders also offer split loans, where you can divide your loan into fixed and variable portions.

Understanding Fees

In addition to interest rates, various fees can add to the cost of your home loan. These may include application fees, valuation fees, legal fees, and ongoing account fees. Be sure to ask lenders for a complete list of fees and compare them carefully. Some lenders may waive certain fees as part of a promotion, so it's always worth negotiating.

The Importance of Comparison

Comparing interest rates and fees from different lenders is crucial to finding the best deal. Use online comparison tools and calculators to get an idea of your potential repayments and the total cost of the loan. Don't just focus on the headline interest rate; consider the comparison rate, which includes fees and charges. A mortgage broker can also help you compare different loan products and navigate the complexities of the mortgage market.

Making the Right Choice

Choosing a home loan is a big decision, and it's essential to do your homework. A 90% loan can be a great way to get into the property market sooner, but it's not without its risks. Make sure you can comfortably afford the repayments, even if interest rates rise. Consider seeking advice from a financial advisor or mortgage broker to help you make the right choice for your individual circumstances. Remember, owning a home is a long-term commitment, so it's crucial to plan carefully and make informed decisions.

Consult a Mortgage Broker

Navigating the home loan market can be overwhelming, especially with so many different lenders and products to choose from. A mortgage broker can act as your advocate, helping you find the best loan for your needs and negotiating with lenders on your behalf. They have access to a wide range of loan products and can provide expert advice tailored to your situation. A good mortgage broker can save you time, money, and stress.

Consider Your Future Goals

When choosing a home loan, it's essential to consider your future goals. Do you plan to upgrade to a larger home in a few years? Are you likely to have changes in your income or employment? Choose a loan that offers flexibility and features that align with your long-term plans. For example, a loan with redraw facilities can be useful if you need to access extra funds in the future. A loan with offset account can help you save on interest.

Review and Refinance

Once you've secured your home loan, it's important to review it regularly. Interest rates and loan products change over time, so it's worth checking whether you can get a better deal by refinancing. Even a small reduction in your interest rate can save you thousands of dollars over the life of the loan. Don't be afraid to shop around and negotiate with your lender. They may be willing to offer you a better rate to keep your business.