With Australian property prices skyrocketing in the years after the pandemic, it's a big ask for homebuyers in capital city markets to save hundreds of thousands of dollars towards a deposit.
As growth in home prices has outstripped real wage growth, more and more prospective buyers are considering home loans with higher loan-to-value ratios (LVRs) than the standard 80%.
It's a viable option to get them into the market sooner so let's check everything you need to know about 90% LVR home loans.
What is a 90% LVR home loan?
Before we start, let's establish exactly what we're talking about.
Loan-to-value ratio - or LVR - refers to the loan amount versus the value of the property you're purchasing. Say you were buying a property worth $600,000 and you have $120,000 as a deposit, your loan amount will be $480,000 - or 80% of the property's value, so an 80% LVR.
A 90% LVR loan means you will have a 10% deposit, so $60,000 to put towards the $600,000 value of the property. In that case, your loan will be for $540,000 which represents an LVR of 90%.
You can get an idea of how LVRs work by using our Loan-to-Value Ratio calculator.
All lenders will consider loan-to-value ratios in home loan applications. It can determine how much money you can borrow to buy a property, the interest rate you will be offered, and whether you will pay lenders mortgage insurance (LMI) (more on this below).
Typically, borrowers with higher LVR loans - that is, borrowing more of the property's value - will be offered higher interest rates.
Who offers 90% LVR home loans?
Many lenders - including banks, non-bank lenders, and specialist lenders - offer 90% LVR home loans. These have become increasingly common on the Australian lending market over the previous two decades.
The shift to higher LVR loans from the old standard of 80% can partly be attributed to the availability of lenders mortgage insurance (LMI). This is a form of insurance that protects the lender against any losses they may incur in the event a borrower fails to make their home loan repayments. Although the insurance covers the lender, it is the borrower who pays the lender's insurance policy.
While some lenders choose not to provide home loans to those with LVRs of more than 80%, other lenders routinely offer loans of up to 90% LVR - some up to 95% LVR.
Under the federal government's Home Guarantee Scheme, some eligible borrowers can obtain a home loan of up to 98% LVR - or with a 2% deposit - without having to pay LMI.
See also:
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Does LMI apply to all 90% LVR loans?
Although it's standard to levy LMI on borrowers taking up home loans with LVRs higher than 80%, this can depend on the policy of individual lenders.
As at April 2025, Ubank waives LMI for home loans up to 85% LVR (a 15% deposit) while non-bank lender Sucasa does not charge LMI on loans up to 98% LVR for eligible borrowers (and eligible properties). Other lenders may also choose to waive it for select borrowers.
See also: Which lenders offer low or no-cost LMI?
See also: LMI calculator
Another way that may help you avoid paying LMI is to seek a guarantor for your home loan, usually a parent or relative, who essentially agrees to use the equity in their home as security for part or all of your mortgage.
For some lenders, this can take the place of security that would have been provided by a larger deposit.
The catch is the guarantor is liable for making your loan repayments if you can't meet them. If they can't meet them either, they could face the lender repossessing their home.
See also: What happens if you default on your mortgage?
Guaranteeing someone else's home loan is not to be taken lightly, nor is asking someone to be your guarantor. Many lenders will insist both parties seek legal advice to ensure both understand the responsibilities and possible consequences before they approve a guarantor-backed loan.
Who is eligible for a 90% LVR home loan?
Again, this will greatly depend on the policies of individual lenders but here are a few factors that may help you to secure a 90% LVR home loan:
Genuine savings
Many lenders will look at the money you have saved yourself over a period of time. Genuine savings is different from the balance you have sitting in a savings account which may have been boosted by a gift, a one-off work bonus, or by selling a car for example.
Many lenders will check to see if you have saved your deposit yourself by putting away regular savings. The time period will depend on the lender but can be anywhere between the past three months to a year. Lenders like to see borrowers have set aside savings on a regular basis as they believe this stands them in good stead to be able to make regular home loan repayments.
Credit score
All lenders will routinely check your credit score to learn your credit history and how you've performed in meeting any previous or existing debts. A poor credit score may see a lender decline your home loan application or offer you a higher interest rate. A good credit score can give the lender confidence in your financial management skills and your ability to diligently service a home loan. This can be particularly important if you are applying for home loan with a deposit less than 20%.
Borrowing power
Lenders will look at the property price, your income, living expenses, existing debts, and dependents in determining how much they will lend you. (Our borrowing power calculator can give you some idea of this amount.) While you can still secure a home loan with a deposit less than 20%, your loan amount may not extend to the type of property you are looking to buy.
If your borrowing power is less than you were hoping for, you can consider searching for a different type of property, cutting your expenses where possible, or saving more.
See also: The best budgeting and savings apps for Australians in 2025
Pros and cons of 90% LVR home loans
As with all financial decisions, there are always benefits and drawbacks to weigh up. Let's start with the pros.
Benefits of 90% LVR home loans
Gets you into the property market sooner
Securing a place in the property market may outweigh the costs of paying LMI, extra loan fees, and a higher interest rate - particularly in a fast-rising property market. It may be a matter of copping the upfront cost to reap the benefit of longer-term growth in value. When your equity in your home grows to 80% (through property value growth as well as your regular loan repayments), you can look at refinancing your home loan to a lower interest rate.
Loan repayments may be comparable to rent
This will greatly depend on the rental market and home loan market interest rates but sometimes rents and home loan repayments may not be that much different. Of course, there are additional costs with owning a home such as insurance, rates, maintenance, etc. but paying rent while trying to save for a deposit can be difficult. By buying your own property, the money you are paying to live somewhere each week goes to your own asset rather than paying off someone else's investment loan.
Building equity
By having your own property, you can build equity over time just by owning it. As property values rise, so too will your equity in your property. You can use this to grow wealth or potentially borrow against should you wish to take out another loan for other purposes, such as an investment property or to fund renovations or upgrades.
Disadvantages of 90% LVR home loans
Can be more difficult to secure a loan
Higher LVR borrowers can face more stringent approval criteria than borrowers with higher deposits. This may see you not eligible for loans with some lenders, having to wait longer for your loan application to be assessed, and/or facing stricter conditions if you receive approval. A mortgage broker may be able to steer you in the direction of lenders who are more favourable towards borrowers in your circumstances.
Can cost you more to borrow
Higher LVR loans are considered higher risk, and that can attract not only LMI but higher loan fees and a higher interest rate. Lenders may also be less likely to offer added loan features and extras to higher LVR borrowers. This can mean your upfront costs and repayments may be substantially higher than for other borrowers.
Higher risk of negative equity
Simply put, negative equity means you would still owe your lender if you were to sell your home because its value has decreased since you bought it. Although negative equity is quite uncommon in Australia, anything can happen on financial and property markets.
It generally occurs when homes see a significant fall in value which can sometimes happen after unsustainable property market bubbles or where a property is purchased in a speculative location undergoing a boom that doesn't last, such as a mining town for example. Generally, lenders are wary of financing loans to properties susceptible to significant price downturns but there is no accounting for unforeseen triggers.
See also: Are you a mortgage prisoner?
Savings.com.au's two cents
There are a multitude of home loans on the market for buyers who don't have a 20% deposit. As property prices escalate, many lenders - and governments - understand that 20% deposits are slipping further out of reach for many people including first home buyers and those in middle-to-lower wage brackets.
Borrowers should check their eligibility for government schemes, grants, and stamp duty concessions that may give them the added boost they need to get into the housing market.
You can also boost your own chances of securing a higher LVR home loan by being able to demonstrate you have genuine savings and a sound credit history. A good mortgage broker may be able to direct you towards lenders who are willing to lend to borrowers in your circumstances.
Once you're in the market and building up equity in your own home, you can look to refinance your home loan to a lower interest rate or to secure better features or conditions you may not have been offered with your initial home loan.
Image by Jack Sparrow via Pexels
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