Hey everyone! Are you dreaming of owning a home but struggling with a hefty deposit? You're not alone! Many first-time buyers and those with limited savings often look for 90% home loans to make their homeownership dreams a reality. In this article, we'll dive deep into which banks and lenders offer these loans, what to consider, and how to increase your chances of getting approved. Let's get started!

Understanding 90% Home Loans

Before we jump into the specifics of which banks offer 90% home loans, let’s break down what these loans actually entail. A 90% home loan means you're borrowing 90% of the property's value, and you only need to provide a 10% deposit. This can be a huge help for those who don't have years to save up a traditional 20% deposit. For example, if you're buying a house worth $500,000, you would only need a $50,000 deposit instead of $100,000.

However, it’s not all sunshine and rainbows. With a smaller deposit, you're borrowing a larger amount, which means higher monthly repayments and more interest paid over the life of the loan. Lenders also see these loans as riskier, which often translates to higher interest rates and the requirement for Lender's Mortgage Insurance (LMI). LMI protects the lender if you default on the loan, but it's an added cost for you. Despite these drawbacks, a 90% home loan can be a fantastic way to get into the property market sooner rather than later, especially when house prices are rising rapidly. Many people find that the cost of LMI is offset by the capital gains they make on their property while they otherwise would have been saving.

Benefits of a 90% Home Loan

• Lower Deposit: This is the most obvious advantage. Needing only a 10% deposit makes homeownership accessible much sooner.
• Get into the Market Sooner: Instead of waiting years to save a larger deposit, you can buy a property now and start building equity.
• Potential Capital Growth: Property values may increase while you're paying off your loan, allowing you to benefit from capital growth.

Risks of a 90% Home Loan

• Higher Interest Rates: Lenders typically charge higher interest rates on 90% loans to compensate for the increased risk.
• Lender's Mortgage Insurance (LMI): You'll likely need to pay LMI, which can add a significant amount to the upfront costs of the loan.
• Higher Monthly Repayments: Borrowing a larger amount means your monthly repayments will be higher.

Banks That Offer 90% Home Loans

Okay, let's get to the juicy part – which banks actually offer 90% home loans? While offerings can change and it's always best to check directly with the lender or a mortgage broker, here are some of the major players and smaller institutions that commonly provide these loans.

Major Banks

• Commonwealth Bank (CBA): CBA often provides 90% home loans, especially to first-time buyers. They have a range of loan products and may offer competitive rates depending on your circumstances. They assess each application on a case-by-case basis, looking at your income, credit history, and overall financial situation. CBA also provides various tools and resources to help you understand the home loan process.
• Westpac: Westpac is another major bank that frequently offers 90% home loans. They have different loan options to suit various needs, and their eligibility criteria will include assessing your ability to repay the loan. Westpac also considers factors such as your employment stability and savings history. It's worth noting that Westpac also owns several other brands, such as St.George, Bank of Melbourne, and BankSA, which may have slightly different offerings.
• National Australia Bank (NAB): NAB is known for its competitive home loan packages, including 90% loans. They focus on responsible lending and will thoroughly evaluate your financial situation to ensure you can comfortably manage the repayments. NAB also offers various support programs and educational resources to assist first-time homebuyers throughout the process.
• ANZ: ANZ provides a range of home loan options, and 90% loans are often part of their portfolio. They look at various factors, including your income, expenses, and credit score, to determine your eligibility. ANZ also offers flexible repayment options and features like redraw facilities to help you manage your loan effectively.

Smaller Banks and Lenders

• ING: ING is a popular online bank that often offers competitive rates on home loans, including 90% loans. They are known for their straightforward application process and customer-friendly service. ING's eligibility criteria are generally similar to the major banks, but they may have slightly different policies regarding LMI and other fees.
• Macquarie Bank: While often associated with investment banking, Macquarie also has a retail banking division that offers home loans. They may provide 90% loans to certain customers, particularly those with strong financial profiles. Macquarie is known for its innovative products and personalized service.
• Bendigo and Adelaide Bank: This bank often supports local communities and may have specific programs for first-time buyers. They offer a range of home loan products, including 90% loans, and their lending criteria may be more flexible than some of the larger banks.
• Suncorp: Suncorp provides various banking and insurance products, including home loans. They may offer 90% loans as part of their range, and it's worth checking their current offerings and eligibility requirements.

It's important to note that the availability and terms of these loans can change. Always check directly with the lender or consult a mortgage broker for the most up-to-date information.

Factors Affecting Approval for a 90% Home Loan

Getting approved for a 90% home loan isn't always a walk in the park. Lenders are taking on more risk, so they'll scrutinize your application carefully. Here are some key factors that can affect your chances of approval:

• Credit Score: A good credit score is crucial. Lenders use your credit history to assess your reliability as a borrower. Make sure to check your credit report and address any issues before applying.
• Income and Employment Stability: Lenders want to see that you have a stable income and employment history. They'll typically ask for proof of income, such as payslips and tax returns.
• Savings History: A solid savings history demonstrates your ability to manage your finances. Lenders like to see that you've been saving consistently over time.
• Debt-to-Income Ratio: This is a measure of your monthly debt payments compared to your monthly income. Lenders want to ensure that you're not overextended with debt.
• Assets: While you might not have a large deposit, having other assets can strengthen your application. This could include investments, shares, or other valuable possessions.
• LMI Assessment: Lenders will assess the LMI premium based on your deposit size and loan amount. Being prepared for this cost is essential.

Tips to Increase Your Chances of Approval

So, how can you boost your chances of getting approved for a 90% home loan? Here are some tips to consider:

• Improve Your Credit Score: Pay bills on time, reduce debt, and correct any errors on your credit report.
• Save a Larger Deposit (If Possible): Even saving an extra 1% or 2% can make a difference and potentially lower your LMI premium.
• Demonstrate Stable Employment: Stay in your job for a longer period or show a consistent history of employment.
• Reduce Debt: Pay down credit card balances and other debts to improve your debt-to-income ratio.
• Provide a Strong Application: Be thorough and accurate when filling out your application. Include all necessary documentation and be prepared to answer any questions the lender may have.
• Consider a Guarantor: If you have a family member who is willing to guarantee your loan, it can significantly increase your chances of approval.
• Work with a Mortgage Broker: A mortgage broker can help you navigate the complex world of home loans and find a lender that's a good fit for your needs.

The Role of a Mortgage Broker

Speaking of mortgage brokers, let's talk about why they can be such a valuable asset when applying for a 90% home loan. A mortgage broker is a professional who acts as an intermediary between you and the lenders. They can assess your financial situation, understand your needs, and then recommend suitable loan products from a variety of lenders.

Benefits of Using a Mortgage Broker

• Access to Multiple Lenders: Brokers have access to a wide range of lenders, including major banks, smaller institutions, and non-bank lenders. This means they can shop around for the best rates and terms for your situation.
• Expert Advice: Brokers are experts in the home loan market. They can provide valuable advice and guidance throughout the application process.
• Save Time and Effort: Brokers can handle much of the paperwork and communication with lenders, saving you time and effort.
• Negotiate on Your Behalf: Brokers can negotiate with lenders on your behalf to get you the best possible deal.
• No Cost to You (In Most Cases): In most cases, mortgage brokers are paid by the lenders, so their services are free to you.

Alternatives to a 90% Home Loan

If you're struggling to get approved for a 90% home loan, or you're concerned about the higher interest rates and LMI costs, there are some alternative options to consider:

• Save a Larger Deposit: This is the most straightforward option. Saving a 20% deposit will eliminate the need for LMI and may get you a lower interest rate.
• Consider a Smaller Loan: Look at properties in a lower price range to reduce the amount you need to borrow.
• Government Assistance: Check if you're eligible for any government grants or schemes that can help first-time buyers.
• Family Guarantee: As mentioned earlier, a family member can guarantee your loan, which can reduce the risk for the lender.
• Rentvesting: This involves buying an investment property while continuing to rent where you live. The rental income can help you pay off the mortgage, and you can potentially benefit from capital growth.

Conclusion

Securing a 90% home loan can be a game-changer for many aspiring homeowners, allowing you to enter the property market sooner and start building equity. While it comes with its own set of challenges, such as higher interest rates and LMI, careful planning and a strong application can significantly increase your chances of approval. Remember to shop around, compare offers from different lenders, and consider seeking advice from a mortgage broker. Good luck with your home buying journey!