Common Mistakes When Applying for a Home Loan with 10% Deposit

Regulatory Framework Governing 10 Per Cent Deposit Lending

Lending at a loan-to-value ratio of 90 per cent is classified as standard lending under Prudential Standard APS 112, provided the borrower meets serviceability criteria and the loan is secured by a registered first mortgage. Where the LVR exceeds 80 per cent, Lenders Mortgage Insurance must provide cover for all losses up to at least 40 per cent of the higher of the original loan amount or the outstanding loan amount. The premium is calculated on a sliding scale based on both the loan amount and the LVR, and in the Australian Capital Territory, no state or territory stamp duty is payable on the LMI premium. Authorised deposit-taking institutions assess capacity to service the loan at an interest rate that is at least 3.0 percentage points above the product rate, regardless of whether the borrower selects a variable, fixed, or split structure.

Lenders Mortgage Insurance Cost Structure and Capitalisation

The cost of LMI for a purchase with a 10 per cent deposit varies materially between insurers and between lenders. A given lender may access LMI from more than one insurer and may apply different premiums depending on the applicant's employment status, loan purpose, and property location. In the ACT, the premium can be paid upfront at settlement or capitalised into the loan amount, subject to the total loan amount remaining within serviceability limits and the lender's policy on capitalisation. Capitalisation increases the principal balance and therefore the interest payable over the life of the loan. Applicants are advised to request a breakdown of the LMI premium, the insurer's identity, and the effect of capitalisation on repayments before proceeding with a formal application.

Product Rate Structures Available at 90 Per Cent LVR

Variable rate, fixed rate, and split rate structures are all available at a 90 per cent LVR, subject to lender policy. Not all lenders offer the same range of home loan products at LVRs above 80 per cent, and rate discounts applicable to lower LVR lending may not extend to lending at 90 per cent. A split structure, in which a portion of the loan is fixed and a portion remains variable, permits the borrower to retain access to offset facilities on the variable component while securing a portion of the loan at a known rate. Offset accounts linked to the variable portion reduce the interest charged on that portion by the daily balance held in the offset account. The fixed portion does not ordinarily permit offset or additional repayments above a specified threshold without incurring break costs.

Serviceability Assessment Under Debt-to-Income Limits

From 1 February 2026, each ADI may lend up to 20 per cent of new owner-occupier loans to borrowers with a total debt-to-income ratio of six times or greater. Applicants whose total debt, including the proposed home loan, exceeds six times their gross annual income may still obtain approval, but the application falls within a constrained portfolio allocation and is subject to heightened scrutiny. In the Canberra market, where median household incomes are elevated relative to other Australian capital cities, this threshold is less frequently binding than in lower-income regions. However, applicants with existing personal loans, car loans, or other credit commitments may find that those liabilities reduce available borrowing capacity under the DTI limit, even where traditional serviceability calculations would otherwise permit a higher loan amount. Repaying or restructuring existing debt before lodging a home loan application can materially improve the outcome.

Genuine Savings Requirements and Alternative Deposit Sources

Most lenders require a portion of the deposit to be classified as genuine savings, defined as funds accumulated over a continuous period, ordinarily three months or more, and held in the applicant's own name or joint names. Acceptable forms of genuine savings include balances held in savings accounts, term deposits, and managed funds. Some lenders accept shares or other liquid assets, subject to verification and policy. Deposits sourced from the First Home Super Saver Scheme are generally accepted as genuine savings, provided the applicant obtains a determination from the Australian Taxation Office and the funds are released in accordance with the scheme's requirements. Gifts from immediate family members may be accepted by some lenders as part of the deposit, but the lender will ordinarily require a statutory declaration from the donor confirming that the funds are a non-refundable gift and do not constitute a loan. Bonus payments, rental income from a property the applicant does not yet own, and funds held for less than three months are not ordinarily classified as genuine savings and may not satisfy lender criteria for a 10 per cent deposit application.

Employment Status and Income Verification Standards

Permanent full-time and permanent part-time employment are the most widely accepted income sources for applications at 90 per cent LVR. Casual employment income is accepted by some lenders, typically where the applicant has been employed with the same employer on a casual basis for a minimum of six or twelve months, depending on lender policy. Contract income, self-employment income, and income derived from a business structure ordinarily require additional documentation, including tax returns, notices of assessment, and in some cases financial statements prepared by a registered accountant. The length of trading history required varies between lenders, with some requiring two full years of tax returns and others accepting one year where income is stable and verifiable. Applicants employed in the Australian Public Service or other government departments in Canberra may benefit from streamlined income verification processes offered by certain lenders, though this is not universal and should be confirmed during the application process.

Property Valuation and LVR Calculation Methodology

The LVR is calculated as the loan amount divided by the lower of the purchase price and the lender's assessed valuation of the property. Where the lender's valuation is below the purchase price, the shortfall must be met by additional funds from the borrower, and the LMI premium is calculated on the higher LVR resulting from the lower valuation. In the ACT market, valuations on established properties in suburbs such as Belconnen, Woden Valley, and Gungahlin are ordinarily well supported by comparable sales data. Valuations on properties in newer developments, particularly where the development is not yet complete or where few sales have settled, may be subject to greater variance. Applicants purchasing in developments near the Molonglo Valley or in emerging areas should be prepared for the possibility that the valuation may not meet the contract price, particularly where the contract was signed during a period of rapid price growth and settlement occurs in a softer market.

Interaction Between the Australian Government 5% Deposit Scheme and 10 Per Cent Deposit Lending

Applicants who are eligible for the Australian Government 5% Deposit Scheme may choose to proceed with a 10 per cent deposit through conventional lending if they have accumulated the larger deposit and prefer to avoid the constraints of the scheme, or if they are purchasing a property that exceeds the applicable price cap. In the ACT, the price cap under the 5% Deposit Scheme is $1,000,000 across all areas. Applicants purchasing above this threshold must use conventional lending. The scheme cannot be combined with Help to Buy, but applicants purchasing with a 10 per cent deposit outside the scheme may still be eligible to access the Home Buyer Concession, which provides full exemption from conveyance duty in the ACT regardless of property value from 1 July 2026. The removal of the property value limit and income threshold from the concession has materially improved access for applicants in the Canberra market who previously exceeded the $1,020,000 property cap or the moderate income threshold.

Principal and Interest Versus Interest-Only Structures

Owner-occupied lending at 90 per cent LVR is ordinarily structured on a principal and interest repayment basis. Interest-only periods are available on investment loans at this LVR, subject to lender policy, but are less commonly offered on owner-occupied loans at LVRs above 80 per cent. A long-term interest-only residential loan is classified as non-standard where the LVR is greater than 80 per cent and the contractual interest-only period is greater than five years or is not specified. Applicants seeking interest-only repayments on an owner-occupied loan at 90 per cent LVR should confirm availability with their broker before proceeding, as product availability is limited and rate pricing may be materially higher than principal and interest equivalents.

Portability and Discharge Considerations for Mobile Borrowers

Canberra's population includes a significant proportion of public servants and defence personnel who may relocate within the ACT or interstate during the life of the loan. Portability provisions permit the borrower to transfer the loan to a new security property without discharging the existing loan and incurring discharge fees or break costs on any fixed rate component. Not all lenders offer portability, and those that do may impose conditions, including that the new property must be of equivalent or greater value, that the loan amount does not increase, and that the borrower's circumstances have not materially changed. Where portability is not available or not permitted, the borrower must discharge the existing loan and apply for a new loan secured over the replacement property. Fixed rate break costs are calculated based on the difference between the fixed rate on the loan and the lender's cost of funds at the time of discharge, and can be substantial where rates have fallen since the loan was established. Applicants who anticipate relocation within two to three years should consider variable or short-term fixed structures, or confirm that portability is available on the product selected.

Documentation Standards and Application Timeframes

Applications at 90 per cent LVR are subject to full documentation requirements. Lenders require recent payslips, ordinarily the two most recent, employment contracts or letters of offer, bank statements covering a period of three months, and identification documents including a driver licence or passport. Where the deposit includes funds from multiple sources, each source must be verified by documentary evidence, including gift letters, bank statements showing the transfer, and where applicable, a determination from the Australian Taxation Office for FHSS Scheme releases. Applications are ordinarily assessed within three to five business days where all documentation is provided at the time of submission and the application is straightforward. Applications involving non-standard income, such as contract or self-employment income, or where the property is outside standard lending criteria, may take longer. Conditional approval is issued subject to satisfactory valuation and verification of any outstanding conditions. Final approval is ordinarily issued within 24 to 48 hours of receipt of a satisfactory valuation, provided all conditions have been met. Applicants should allow a minimum of two weeks from application to final approval, and longer where settlement dates are tight or where the property is in a location that may require additional valuation time.

Securing approval for a purchase with a 10 per cent deposit requires adherence to lender-specific criteria, accurate preparation of supporting documentation, and an understanding of the interaction between LMI, serviceability buffers, and debt-to-income limits. The structure selected, whether variable, fixed, or split, has material implications for repayment flexibility, access to offset facilities, and exposure to rate movements. OAUM Securities maintains access to a panel of lenders with differing policies on LVR, income verification, and product availability. Call one of our team or book an appointment at a time that works for you.

Frequently Asked Questions