With ever increasing property prices it is becoming more and more difficult to reach that magic number for your deposit. Currently a home loan requires a standard deposit of 20%. With median house prices currently at approximately $500,000, this equates to a deposit of $100,000. This figure may look like an impossible task for the average West Australian.
This is where Lenders Mortgage Insurance (LMI) comes in handy. LMI is charged when people have a deposit that is less than the standard 20% of your property’s purchase price. LMI will act as a security measure to the lender because you are considered a high risk borrower if your deposit falls shy of 20%. The LMI protects the lender if, for some reason, you are unable to meet your financial repayments.
The benefits for you in terms of LMI include the fact you are now able to purchase your dream home or diversify your investment portfolio with as little as 5% of the purchase price. This opens up more opportunities for you as you can now look at a better location, larger house, and or even increase your ability to renovate and improve the resale price.
You may be debating whether or not you should take the time to save more so you don’t have to pay as much in loans and interest rates. However by the time you save up enough money, the house prices may have increased to a point that could possibly negate any savings in interest you may have had in the first place. Therefore LMI speeds up your ability to achieve you property goals much earlier than expected.
Some small lenders are presently offering LMI premiums at $1 to improve their competiveness against the big lenders. The savings that this offers people on a new home loan of $400,000 with a 10% deposit is approximately $8,589.
There are certain requirements for the $1 LMI premiums, which include that you are buying a property; you have at least 5% in genuine savings; you have a perfect credit history; you are borrowing no more than $850,000; and your loan is principal and interest.
If you have any more questions about LMI or a loan for your dream home and or investment property, please contact Launch Finance for a meeting to discuss your potential.