Most home buyers have probably heard about needing a 20% deposit to buy property. But that is not necessarily true as there are other types of loan options that can be taken advantage of.

Did you know that there are a limited number of lenders that allow you to borrow up to 98% of a property’s value? Home loans like LJ Hooker Home Loans 5 Star allow owner occupiers to borrow up to 98% (inclusive of the capitalised mortgage insurance premium) of a property’s value. You can also use a 98% home loan to build your home.

This means a smaller deposit may be required compared to traditional bank lenders. Your deposit can also be boosted by government incentives like the First Home Owner Grant.

A 98% home loan option may be ideal for those who want to secure a property quickly as they can take out a loan and buy a property faster rather than having to wait to save for the usual 20% deposit.

High loan-to-value ratio (LVR) loans have seen increased demand this year as First Home Buyers return to the market. This tells us that although banks may have tightened their lending criteria because of the current pandemic, it’s more than possible to secure a low-deposit home loan today. In addition, the current market conditions are ripe with all-time low interest rates and less buying competition.

So What Is a 98% Home Loan?

98% home loans are a type of low-deposit loan available in Australia, that allows buyers  to borrow up to 98% of the total value of the property.

Generally, to be eligible to apply for a 98% home loan, you’ll need to:

  • Be at least 18 years old
  • Be a permanent Australian resident or citizen
  • Have a good credit history
  • Have enough savings or assets for the deposit required
  • Have a stable income and be able to show proof of your employment history

As a general rule, you should have access to at least 3% in savings or be able to sell an asset to make up the deposit. If you have a strong rental history via a licenced real estate agency this can assist with your loan approval as it shows you can manage a regular rent / loan type repayment.

How much Lender’s Mortgage Insurance (LMI) will I need to pay?

Using the LJ Hooker Home Loans 5 Star loan as an example, you don’t need to pay the LMI upfront. The premium can be capitalised on top of your loan and you simply repay it via your loan repayments. A professional lending specialist will help you understand how LMI applies to you.

Lender’s Mortgage Insurance (LMI) is an insurance policy that protects the lender if you are unable to pay off your loan and enter into default. While the bank takes out the policy, borrowers will need to pay the premium.

All lenders require you to pay LMI if your home loan deposit is less than 20% of the total value of your property.

Step-by-Step: Securing a 98% home loan

If you are set on getting into property and securing a 98% home loan, here are the steps and documents you’ll need to prepare beforehand.

  1. Make an appointment with a lending specialist to start a budget, have them access your credit report, and start the pre-approval process
  2. If you have any small personal debts, it may help to pay off as much as you can and cut down on unnecessary financial commitments to increase your credit standing
  3. Gather important information like your savings account history and a copy of your rental ledger showing you’ve been paying your rent on time (hopefully!)
  4. Be realistic on your budget and be prepared to research property. An LJ Hooker Home Loans lending specialist can help you access free property suburb reports with sale history and suburb data to help with your buying decision
  5. Armed with a full home loan pre-approval, find the right property and negotiate hard to get the best price!

It’s important to note that a lender is more likely to decline a loan application based on a bad credit history, poor spending habits, job instability, and not having the right documents ready on the application.

That’s why using an intermediary like a lending specialist is key to help you get all these in order prior to applying for your home loan.


If you’re keen to buy property and take out a home loan, it’s beneficial to be armed with the right information to understand everything about 98% home loans and what you need to increase your chances of getting approved.

The circumstances for your home loan might differ according to your deposit amount, your financial standing, and the final offer. It’s always smart to be proactive and do your research beforehand, so you can find out everything you need to know about the property itself and the type of home loan you wish to get before making a decision.


If you’re interested in securing a 98% home loan and have queries you need answered beforehand, simply fill in your details below and one of our lending specialists will be in touch for an initial phone or web based chat.

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This article is prepared based on general information. It does not take into account individual financial objectives or needs and is not financial product advice. Credit criteria applies to any loan application. Terms and conditions, fees and charges apply to LJ Hooker Home Loans 5 Star home loans.