Risk Management For 95% to 100% LVR Home Loans

Borrowing at 95% to 100% LVR lets you buy sooner, yet it also leaves a very small equity buffer if prices dip or if your income changes. We have helped buyers and refinancers on both sides of this decision and the pattern is consistent. Those who prepare for shocks at the start handle the first years well. Those who hope the market will do the work for them tend to feel stress. This guide sets out practical risk controls you can put in place from day one. Throughout, we point out where a lender partner matters. Empower Money is a reliable Australian home loan lender and refinance specialist that builds products and processes for customers with low deposits who still want long term financial safety.

The core borrower risks you must manage

High LVR loans are not for everyone. If they fit your situation, treat the following risks with seriousness and put clear controls around them.

  • Negative equity. With 95% to 100% LVR a small price fall can put the loan balance above the property value once selling costs are considered. That traps you in the loan and makes refinancing difficult.
  • Payment shock. Variable rates can rise, fixed rates can expire, and repayments can jump. You need a way to absorb risk events without missing payments.
  • Thin cash flow. Ownership adds council rates, insurance, utilities, maintenance, and travel. A tight surplus leaves little capacity for unplanned bills.
  • Refinancing limits. Until you reach about 80% LVR many lenders require LMI again and may price the loan higher. If your LVR does not fall or if values slip you can be stuck on a less competitive rate.
  • Early default risk. The first 3 years carry the most risk because your equity is lowest and life events are unpredictable. Protect those early years.

Your 7 step risk plan before and after settlement

  1. Stress test repayments. Model your loan at 2% to 3% above the starting rate and check you can still afford payments while covering all living costs. If not, reduce the loan size or consider a cheaper property.
  2. Build an emergency buffer. Target 3 to 6 months of expenses held in an offset account. Make it automatic. Treat this buffer as untouchable except for real emergencies.
  3. Choose a rate structure that suits your risk. If your budget cannot manage further rises, consider fixing a portion for 2 to 3 years and keep the balance variable with offset. If you value flexibility, run variable with a discipline to pay extra while rates are steady.
  4. Protect income and family. Review income protection, life, and TPD cover so a health or job event does not cascade into arrears. Check your super for existing cover and fill any gaps.
  5. Accelerate equity. Pay a little extra each month and park savings in offset. Aim to move the LVR below 90% quickly, then toward 80% where pricing improves and LMI is no longer a constraint.
  6. Budget for ownership costs. List rates, insurance, utilities, transport, maintenance, and a sinking fund for appliances and minor repairs. Add this to your loan budget to avoid thin margins.
  7. Ask for help early. If a payment looks tight, talk to your lender before the due date. Short term arrangements are easier when you are proactive and your history is clear.

Where Empower Money fits for buyers and refinancers

Empower Money focuses on responsible high LVR lending and refinance. We design pathways that make low deposit ownership possible while still prioritising long term stability. That means clear pricing, transparent serviceability checks, offset accounts, and the ability to make extra repayments without penalty. If you already own, we also assess refinance options that release you from LMI where equity allows or that improve cash flow without extending risk unnecessarily. Our team models rate rises with you so you know exactly how the loan behaves in a range of scenarios.

What Empower Money’s Power Up Elite is Built For

Power Up Elite is built for customers who are ready to buy now but do not have a cash deposit. It offers up to 105% financing with a two loan structure and no LMI, subject to approval and standard credit criteria. The goal is simple. Cover purchase price and typical purchase costs so you can move in sooner while keeping monthly repayments manageable.

  • Structure. 80% first mortgage plus 25% second mortgage which totals 105% of the property value. The first loan runs for 30 years and the second loan runs for 10 years. You can make extra repayments on both, and an offset account is included.
  • Speed and scope. Online application takes about 15 minutes. Typical conditional pre approval is available within about 7 business days subject to assessment. Eligible properties sit in metro postcodes only and the maximum loan amount is up to $2,000,000.

The current variable rate from 6.95% applies to the first mortgage, with the second mortgage priced on application. Unlimited extra repayments are allowed. Transaction fees are free for internet, phone, BPAY, and EFTPOS. The product is designed to combine access with control so you can build equity quickly while maintaining flexibility.

Eligibility snapshot and fees to budget for

Power Up Elite suits customers who can demonstrate stable employment and clean conduct even if savings are limited. Minimum credit score is 650, 750 is preferred. A full doc application is required. There must be no defaults in the last 24 months. Employment history should show at least 2 years of stability. The second mortgage must be clearly serviceable within your income and expense profile. Properties must be within metro postcodes.

Transparent fees apply and should be included in your budget. The application fee is $2,200. The annual fee is $395. The discharge fee is $795. If you are building, a construction risk fee of 5% is funded via the second mortgage. A construction admin fee of $750 applies. Progress inspection fees and solicitor or valuation fees are at cost. Facility or account variations are $450. Day to day transactions using internet, phone, BPAY, and EFTPOS are free. Your adviser will show these items in a full quote before you proceed.

How to use a 105% structure without taking on unnecessary risk

The two loan design gives you levers to manage exposure. The first mortgage provides a long runway at a competitive variable rate with offset so you can keep cash parked against the balance. The second mortgage is shorter to help you retire the top up quickly. Many customers choose to fix a portion of the first mortgage for certainty while keeping the rest variable and linked to the offset. Others leave the full first mortgage variable and direct every spare dollar to the offset, then sweep lump sums to the second mortgage to accelerate pay down.

If you plan to build, allow for contingencies. Keep the turnkey price and the funded fees within a buffer so your final LVR remains as expected. If you buy established, order a thorough building and pest inspection so you do not face early maintenance bills that strain the buffer you just built.

Two practical scenarios

A first home buyer couple with a combined income of $180,000 is renting while saving. They find a $780,000 metro home. With Power Up Elite they fund 105% to cover price and purchase costs. The first mortgage is $624,000 and the second is $195,000. They place $20,000 in offset from existing savings to lower interest from month one. They direct an extra $400 each month to the second mortgage and commit tax refunds to it as well. Within 4 years the second loan is cleared. Their LVR then sits near 80% and they refinance to a lower rate without LMI.

An investor with strong income but thin cash reserves wants to consolidate debt and buy a home to occupy. They use Power Up Elite to acquire a $900,000 townhouse while clearing a small credit card balance at settlement. They select a split on the first mortgage. Half fixed for 3 years, half variable with offset. They set a 6 month emergency fund goal and pause discretionary upgrades until it is fully funded. When a small vacancy in their rental portfolio reduces surplus for 2 months, the offset covers the gap and repayments remain on time.

How Empower Money supports you beyond settlement

We do not disappear at settlement. Our team schedules 30, 90, and 180 day check ins to review your budget, buffer, and any changes in income. We help you measure progress toward key milestones like retiring the second mortgage and reaching 80% LVR. If rates move, we model the new repayment and agree on actions. If life changes, we use hardship support where appropriate and adjust your plan so short term issues do not become long term setbacks.

Final Thoughts

High LVR lending is a tool, not a shortcut. Used with discipline it gets you into a home sooner while you build equity and habits that protect you through cycles. Empower Money and Power Up Elite create a path for customers who are ready to buy now but also want to sleep at night. Start with the 7 step plan, build your buffer, use the offset, and retire the second mortgage with intent. That is how you keep control from day one and turn a high LVR start into a strong long term position.

FAQs

Is a 95% to 100% LVR home loan safe?

It can be when you pair the loan with a clear risk plan. The keys are a real buffer in offset, a repayment strategy that survives higher rates, and early action if income changes. Without these, high LVR loans are fragile.

How does Power Up Elite reach 105% of the purchase price?

It combines an 80% first mortgage with a 25% second mortgage to cover purchase price and typical costs. The first loan runs for 30 years with offset. The second runs for 10 years and is designed to be paid down quickly.

Do I need a cash deposit for Power Up Elite?

No cash deposit is required if you meet credit and serviceability criteria and the property sits in an approved metro postcode. You still need funds for moving, insurance, and any upgrades that are not part of the contract price.

What credit and employment profile do I need?

A minimum credit score of 650 is required, 750 is preferred. Full doc income verification is needed and there should be no defaults in the last 24 months. Employment should be stable for at least 2 years.

What are the headline costs I should plan for?

Application fee $2,200. Annual fee $395. Discharge fee $795. For builds, construction risk fee 5% funded via the second mortgage plus a $750 construction admin fee. Progress inspections and legal or valuation costs are at cost.

Can I make extra repayments and use an offset account?

Yes. Both loans allow extra repayments and an offset account is included for the first mortgage. Using offset reduces interest and shortens the effective term without locking cash away.

What is the best way to manage the second mortgage?

Treat it as a priority. Direct extra repayments and any windfalls to it. Once it is cleared your LVR drops and your monthly commitments ease, which increases resilience.

Can I refinance out of Power Up Elite later?

Yes. Many customers refinance once the LVR is below 80% and their risk profile improves. We help you assess the timing so you do not give up features you still need.

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