Can You Still Take Out 106% Home Loans?

2 June 2017
Saving up enough money for a deposit on a home loan is one of the biggest financial struggles home buyers in Australia have, but there are good reasons why you can no longer borrow 106% of the purchase value.

What is a 106% home loan?

106% home loans were a type of home loan that used to exist in Australia. This type of loan allowed the buyer to borrow not only the full property purchase price, but also many of the associated upfront costs including legal fees, valuations, stamp duty, and LMI premiums.

The difference between 100% and 106% home loans is that with 100% loans, the borrower only borrows the amount required to purchase the property (the full purchase price) with 0% deposit. This meant the borrower still needs to have sufficient savings to cover the other upfront costs of buying a home or investment property.

106% home loans were desirable to first home buyers looking to get a foot in the property market. However, they came with a number of disadvantages, including higher interest rates, extra mortgage insurance (LMI), property restrictions in terms of where and what you could buy, and a difficult approval process.

Can you still take out 106% home loans?

Unfortunately, this type of loan is no longer available in Australia. Following the huge fallout of the global financial crisis (GFC), lenders in Australia stopped offering a large range of no-deposit home loans such as 106% home loans. However, there are a number of other ways borrowers can still take out a home loan with no deposit.

See our comparison table below which features current providers who offer variable home loans with LVR of 95% or higher, with links direct to the providers website. Please note that this table was formulated based on a $600,000 home loan taken out in NSW, repaying principal and interest, sorted by comparison rate (lowest to highest).

What other no deposit options are available?

Although the 106% home loans were phased out in Australia, there are still many different options to help borrowers to buy a home or investment property. One of the most popular options is a guarantor loan.

A guarantor home loan requires a guarantor (usually parents) to guarantee a loan by agreeing to be jointly liable. This means they will have to repay the loan if the borrower fails to make the required repayments. Usually the guarantee is secured by the guarantor’s home or other property.

The aim of guarantor home loans is to make it easier for first home buyers to enter the property market. Usually once the borrower has paid off a certain amount of the home loan, the guarantee agreement can be removed and the loan becomes a “normal” home loan.

Comparing guarantor loans with Canstar

Now that we’ve explained why 106% home loans are no longer available, and how a guarantor home loan works, you can compare lenders who offer these loans. It’s important to always read the product disclosure statement (PDS) and terms and conditions before making a purchase decision.

Fortunately for you, Canstar compares over 1,100+ home loans in our easy-to-use comparison tables. Compare guarantor loans with Canstar today:

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