LMI & First Home Loan Deposit scheme

Saving up for a home loan deposit is not always an easy, however with lender’s mortgage insurance (LMI) you may be able to obtain a home loan with as little as a 5% deposit.

What is Lender Mortgage Insurance?

Lender’s mortgage insurance provides an additional layer of security for lenders. It protects them from financial loss if the borrower is unable meet their repayments. This could potentially allow lenders to lend you a larger percentage of the total value of your home. This can reduce the initial deposit you need for a loan to as little as 5% and help you enter the property market sooner or potentially afford a higher value home.

The cost of LMI is largely calculated based on the size of your deposit and how much you borrow. Contributing more towards the purchase price of your property can lower the cost of LMI. The premium can be paid as a lump sum at the start of your loan or it can form part of your repayments over the term of your mortgage.

The Federal Government is also providing additional support to help first home buyers secure a home loan. Under the First Home Loan Deposit Scheme, eligible participants can obtain a home loan with a minimum 5% deposit without needing LMI.

It works by the Government guaranteeing the shortfall needed to meet a 20% deposit. For example, if you are looking to purchase a $500,000 home and you can only afford to make a $45,000 deposit, the Government will guarantee $55,000 in order to bring your security up which may mean you no longer need to pay LMI.

To be eligible for the scheme you must be purchasing your first residential property. The scheme is open to owner occupiers meaning you need to live in the purchased home. You will also need to have saved a minimum 5% deposit. Additionally, thresholds will apply for the value of the property.  These thresholds vary between each state and territory.

This scheme is available for the first 10,000 first home buyers for 2020-21. Additionally the Government has added an extra 10,000
places for those specifically purchasing a newly built home.

Talk to a Suitable Loans Mortgage Broker today.

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