You’ve probably heard something along the lines of ‘you need a 20% deposit to buy a home’, right? Well, not necessarily. Today we’ll look at two options available to eligible first home buyers, including a $1 lenders mortgage insurance offer that’s just been launched.
Now, to be fair, that 20% deposit figure quoted by your uncle Barry wasn’t plucked out of thin air. Barry’s just a little behind the times (as a scroll through his Facebook feed would attest).
Let us explain.
In the past, first home buyers typically had to save a 20% deposit to avoid paying lenders mortgage insurance, otherwise known as LMI.
Now, this insurance isn’t to protect you. LMI is to protect the bank against any loss they may incur if you’re unable to repay your loan (because they see first home buyers with less than a 20% deposit as higher risk).
The problem is that LMI isn’t cheap. For example, if you wanted to purchase a $600,000 property, but only had a 15% deposit ($90,0000), you’d likely have to pay about $6000 in LMI.
But since the start of the year, two options to avoid paying thousands of dollars in LMI have emerged for eligible first home buyers: the first being the federal government’s First Home Loan Deposit Scheme (FHLDS), and more recently, St George’s $1 LMI offer.
Let’s start with St George’s $1 LMI announcement
Basically, LMI will be reduced to only $1 for eligible first home buyers with a Loan to Value Ratio (LVR) up to 85%.
In other words, it’s for first home buyers who have a deposit between 15% and 20%.
Here are a few other important eligibility details:
– The LMI purchase must be for your first home loan and for your first property (however for joint applications, only one applicant must be a first home buyer).
– You must be the owner-occupier of the property and make principal and interest repayments.
– The offer is available on loans up to $850,000 (with a 15% deposit, this equates to a $1 million property value, which is much higher than the FHLDS below).
– Only one property can be financed per application.
– There are no income caps.
The first home loan deposit scheme
The federal government’s scheme allows eligible first home buyers with only a 5% deposit to purchase a property without paying for LMI – which can save you up to $10,000.
But here’s the catch: only 10,000 spots are available this financial year.
That might sound like a lot but 3,000 spots went in the first 10 days last time.
There are a few other important eligibility details to consider here, too, including:
– Property price caps for different cities and regions across the country (ranging between $400,000 to $700,000 in capital cities).
– Income caps (singles $125,000, couples $200,000).
– For couples, both need to be eligible home buyers.
Get in touch
We understand that buying your first home can be daunting.
But the good news is that we help first home buyers apply for finance on a weekly basis, and we pride ourselves on being there for our clients to guide them through the process.
So if you’d like to find out more about one of the LMI offers above, then please get in touch – we’re more than happy to explain them to you in more detail.