106% loans
- Thread starter Belu
- Start date
Hi Belu
No they are available for anyone.
This type of loan allows you to borrow, upto 106% of the purchase price of a property, which can include the costs associated with the purchase of the property, such as stamp duty, transfer duty and solicitor’s fees.
Who does this type of loan suit?
First home buyers on higher incomes
PAYG wage earners on higher incomes
People who have been successfully self-employed for more than three years
Separated or divorced people who need to re-establish themselves as home owners
Anyone with a good stable income who wants to maintain their current lifestyle
Anyone with a good credit history and stable income who does not have enough saved for a deposit and associated costs
Applications may be in personal, business, company or trust names
Applicants must be Australian Residents
No they are available for anyone.
This type of loan allows you to borrow, upto 106% of the purchase price of a property, which can include the costs associated with the purchase of the property, such as stamp duty, transfer duty and solicitor’s fees.
Who does this type of loan suit?
First home buyers on higher incomes
PAYG wage earners on higher incomes
People who have been successfully self-employed for more than three years
Separated or divorced people who need to re-establish themselves as home owners
Anyone with a good stable income who wants to maintain their current lifestyle
Anyone with a good credit history and stable income who does not have enough saved for a deposit and associated costs
Applications may be in personal, business, company or trust names
Applicants must be Australian Residents
G'Day
The few lenders which offer a 106% loan are more concerned about you, the borrower, and whether you are capable of servicing the debt.
These loans are Full Doc in the complete sense of the word - two years Tax Returns, high servicebility (assessment) rate, a DSR as well, and although you can borrow to 106% of the value of the security property this does not mean that you can borrow 'more' than with another lender, just 'more' against that particular security.
The variable rates are usually around the Standard Variable level, nothing flash but nothing expensive either. So if you are 'squeaky clean' with a solid employment history, good earnings, tax done etc these loans can be worth considering. Otherwise, a 100% loan may get you a better deal
Cheers
Kristine
The few lenders which offer a 106% loan are more concerned about you, the borrower, and whether you are capable of servicing the debt.
These loans are Full Doc in the complete sense of the word - two years Tax Returns, high servicebility (assessment) rate, a DSR as well, and although you can borrow to 106% of the value of the security property this does not mean that you can borrow 'more' than with another lender, just 'more' against that particular security.
The variable rates are usually around the Standard Variable level, nothing flash but nothing expensive either. So if you are 'squeaky clean' with a solid employment history, good earnings, tax done etc these loans can be worth considering. Otherwise, a 100% loan may get you a better deal
Cheers
Kristine
Just remember that a higher LVR will involve LMI and higher interest (not necessarily a higher rate, but more interest dollars because you're borrowing more).
Also remember that it's lack of cashflow, often just temporarily, that causes investors problems. The question I would ask myself before using a 106% LVR loan is this: do I have savings to cover any unforseen expenses (personal or investment)? If, for example, you're using 106% LVR because you have no savings and want to get into the market, think hard about whether you can afford it. The fact that you have no savings suggests you need to work on your money habits first.
Alex
Also remember that it's lack of cashflow, often just temporarily, that causes investors problems. The question I would ask myself before using a 106% LVR loan is this: do I have savings to cover any unforseen expenses (personal or investment)? If, for example, you're using 106% LVR because you have no savings and want to get into the market, think hard about whether you can afford it. The fact that you have no savings suggests you need to work on your money habits first.
Alex
Hi All,
This product is something I am considering since I have a stable high income and my partner has just finished university and will also attain a steady income and I would like to purchase in the next 6-12 months rather than wait say 12-24 months to save for a deposit.
My question is this, trailing around on infochoice i have noted that serviceability often refers to 30%, pardon the stupid question but does this refer to gross or wage income?
ie. $350k loan @ 8.3% = $29,050 or $558pw. Does the 30% refer to the loan payment being below or equal to 30% of net or gross income?
Thanks.
This product is something I am considering since I have a stable high income and my partner has just finished university and will also attain a steady income and I would like to purchase in the next 6-12 months rather than wait say 12-24 months to save for a deposit.
My question is this, trailing around on infochoice i have noted that serviceability often refers to 30%, pardon the stupid question but does this refer to gross or wage income?
ie. $350k loan @ 8.3% = $29,050 or $558pw. Does the 30% refer to the loan payment being below or equal to 30% of net or gross income?
Thanks.
Hi dru1d
The DSR is the Debt Servicing Ratio
Essentially, this means the ratio of money in : money out
For example, if you have Money Out consisting of:
Deemed Living Allowance, $1,000 per month
Credit Cards @ 3% of the Credit Limit, eg $10,000 Card = $300 per month servicing
Mortgage Payments of $2,000 per month
Then Total Committments would be $3,300 per month
If your After Tax Income is $3,300 per month, then you have a DSR of 1:0 meaning no money left over
To achieve a DSR of 1:3 you would need to have 30% left over, ie a monthly After Tax income of $4,290 or thereabouts (someone will, no doubt, tell me I have worked this out wrongly but you get my drift!)
If you have Genuine Savings, then most lenders require a DSR of 1:00 if the Loan to Value Ratio is less than 95%, with Limited Genuine Savings 1:10, if you are borrowing above 95%LVR you may be required to demonstrate DSR of 1:20, so with a DSR of 1:30 you can see that the 106% lenders are building in a healthy safety net for serviceability.
Keep in mind that this is not about your 'Savings'. This is about your Contribution ie what are you putting into the deal. You could have gazzillions of dollars in savings or equity but want to fully fund the deal. This does not mean you have dreadful money habits, this just means that you do not want to put money into the deal.
Lending is not about emotions or moral judgements. It is about setting sensible lending policy which establishes the basis for a healthy, long life deal for both the lender and the borrower. If you can service the deal then the 106% loans secured against a single security can make very good business sense.
Cheers
Kristine
The DSR is the Debt Servicing Ratio
Essentially, this means the ratio of money in : money out
For example, if you have Money Out consisting of:
Deemed Living Allowance, $1,000 per month
Credit Cards @ 3% of the Credit Limit, eg $10,000 Card = $300 per month servicing
Mortgage Payments of $2,000 per month
Then Total Committments would be $3,300 per month
If your After Tax Income is $3,300 per month, then you have a DSR of 1:0 meaning no money left over
To achieve a DSR of 1:3 you would need to have 30% left over, ie a monthly After Tax income of $4,290 or thereabouts (someone will, no doubt, tell me I have worked this out wrongly but you get my drift!)
If you have Genuine Savings, then most lenders require a DSR of 1:00 if the Loan to Value Ratio is less than 95%, with Limited Genuine Savings 1:10, if you are borrowing above 95%LVR you may be required to demonstrate DSR of 1:20, so with a DSR of 1:30 you can see that the 106% lenders are building in a healthy safety net for serviceability.
Keep in mind that this is not about your 'Savings'. This is about your Contribution ie what are you putting into the deal. You could have gazzillions of dollars in savings or equity but want to fully fund the deal. This does not mean you have dreadful money habits, this just means that you do not want to put money into the deal.
Lending is not about emotions or moral judgements. It is about setting sensible lending policy which establishes the basis for a healthy, long life deal for both the lender and the borrower. If you can service the deal then the 106% loans secured against a single security can make very good business sense.
Cheers
Kristine
