Sometimes, saving a 20% deposit can seem impossible, taking advantage of a mortgage insured loan can help you get into the property market sooner.
There are options though to help you buy the home of your dreams, if you don’t have a full deposit saved up for your home.
Lenders Mortgage Insurance (LMI)
Lenders Mortgage Insurance is a once off insurance premium which is added to the loan and can be paid off over time along with the mortgage. LMI protects the lender if the bank has to foreclose on the mortgage and ends up selling the property for less than the outstanding balance on the loan. This allows the lender to offer finance where the borrower has less than a 20% deposit.
** There are some loan products that allow for 85% loans with no LMI waivers and for some professions, 90% with LMI waived..
For more information, see our Guide to Lender’s Mortgage Insurance
Family Guarantee loans:
If your parents or other close family member can act as guarantor, you may be able to borrow up to 100% of the purchase price, eliminating the need for a substantial deposit and freeing you up to use your cash if you need to renovate. The guarantors’ property serves as additional security for your loan. There are certain criteria a guarantor will need to meet to be eligible to offer a guarantee. For more information, see our Guide to Family Guarantee Loans
If your parents or another close family member in your life can gift you funds to put towards your deposit, you will pay a lot less out of your own pocket. Depending on the amount of the gift, you may not need to demonstrate 5% genuine savings. The person providing the gift will be asked to provide a letter or stat dec confirming that the gift is not repayable.
A loan from Family:
If your borrowing capacity is strong and parents or another close family member is willing to loan you the funds, these can be put towards your deposit. There will need to be a detailed agreement confirming the amount of the loan and what repayments will be required. If interest will be charged, this needs to be stipulated too. (Not all lenders offer this option, some specifically preclude borrowed funds being used)
First Homeowners’ Grant:
First home buyers, purchasing a brand-new home, may be eligible, as an example in Queensland, for the $15,000 first homeowners’ grant. This can be put towards your deposit, although it does not count as part of the 5% genuine savings required by most lenders. Each state and territory has different grants that apply.
First Home Guarantee:
If you are a citizen, earning less than $125,000 for individuals or $200,000 for couples, purchasing your first home to live in, you may be eligible for the government guarantee, which helps you to buy with a 5% deposit, to avoid Lenders Mortgage Insurance, and achieve lower interest rates. As an example in Queensland, the property must be less than $700,000 in Brisbane and surrounding regional centres or $550,000 in the rest of Queensland. Each state and territory has different maximum property purchase price limits that apply. For more information, please see our Guide to the First Home Guarantee for First Homebuyers
Family Home Guarantee (for single parents):
If you are a citizen, earning less than $125,000 and are a single parent to at least one dependent child, purchasing a home to live in you may be eligible for the government guarantee helping you buy with a 2% deposit, avoid lenders mortgage insurance and achieve lower interest rates. You do not have to be a first homebuyer to access the Family Home Guarantee. As with the First Home Guarantee, each state and territory has different maximum property purchase price limits that apply. For more information see our Guide to the First Home Guarantee for Single Parents