Having a 20% deposit has been a requirement from most mortgage lenders in Australia for a long time now. It’s only really been since lenders mortgage insurance was introduced in Australia in 1965, that home buyers could get a loan with a smaller deposit, albeit with an extra payment to cover the lender’s risk.
For many buyers, weighing up the extra payment vs saving up a bigger deposit and hoping house prices don’t run away from them. Now, though, we have access to a new type of loan. All you need is a 10% deposit and you won’t have to pay any LMI at all.
Unlike government schemes that are only available to first-time buyers or single parents, this new offer is available to people from all walks of life. Best of all, it’s available on all types of loans – whether you’re going to be an owner occupier or an investor. Depending on the size of your loan, this could save you thousands over the course of your repayments.
At a time when house prices are on the rise, being able to get a pre-approval sooner is more important than ever.
How much you could save
LMI is worked out in a strange way. First, you’re given a percentage. This is based on how much you’re borrowing and what your deposit it. Not every lender has the same rates, but the numbers below are used by at least one popular lender. For those with a deposit that’s exactly 10%, you would pay:
- 1.463% on loans up to $300k
- 1.863% on loans up from $300,001 to $500k
- 2.180% on loans up from $500,001 to $600k
- 2.367% on loans up from $600,001 to $750k
- 2.516% on loans up from $750,001 to $1m
That percentage is then multiplied by your loan amount (not your purchase price). So if you were taking out $900,000 to buy a $1m property, your LMI would be $22,644. This amount is added onto your loan amount and earns interest along with the rest of it.
Want to learn more?
If you want to save thousands (or tens of thousands) on your next property, getting rid of the LMI is a great way to do it. Want to find out how? Speak to one of our brokers by calling 02 4961 4985 or filling out this form.
