No Mortgage Insurance for First Home Buyers?
At the start of the year the Government gave first home buyers a little leg up with the First Home Loan Deposit Scheme. Available to 5000 applicants, this scheme means first home buyers can put down as little as 5% deposit and not pay a cent in mortgage insurance – the CommBank Government will act as the guarantor, saving buyers up to $10,000.
Not bad, huh? And you can still be making good money to qualify – singles can make $125k per annum and couples, 200k per annum. You can apply for the loan scheme via 2 of the major banks (Commonwealth or NAB) or via a long list of other financial institutions.
The good news continues too – you can be eligible for this and other government grants like the First Home Buyers Grant and stamp duty concessions.
There’s a few basic individual requirements and some requirements for the property itself. Pretty basic stuff really – you need to be an Australian citizen over the age of 18 that’s never owned a property before. If you’re buying as a couple, it must be with your spouse or partner.
Each state or territory has its own threshold for the value of the property. See the list outlined below.
State or Territory
Capital city and regional centres
Rest of state
Australian Capital Territory
For the purposes of the scheme, a regional centre includes any centre with a population greater than 250,000. This includes the Gold Coast, the Sunshine Coast, Newcastle and Lake Macquarie, the Illawarra and Geelong. Some other regions have different thresholds.
To be eligible, you’ll need to have saved at least a five per cent deposit. The government says these need to be ‘demonstrated savings’, which means you won’t be able to count any First Home Owner Grant money towards this amount.
You’ll of course need to be currently employed and meet all the requirements of bank – like having the ability to make your repayments.
Of course, if you were late to the party and the 5000 grants have already been allocated, don’t sweat it! St George has come to the party with its $1 mortgage insurance offer. They’ve identified the struggle of saving the 20% deposit and decided they’d help minimise the pain, by reducing the minimum amount needed to 15%
Research shows one of the biggest hurdles for first-home buyers to overcome is the time it takes to save for a deposit, even though you very well could be in the financial position to make home loan repayments. In the 2020 St.George Home Buying Survey, it found that the entire process of saving and planning for a first home could take almost 10 years.
In reality, banks experience very little risk when loan-to-value ratios are lower than 85%, so it’s a win for first-home buyers in not having to save the full 20% deposit to avoid paying this insurance, which only protects the banks anyway.
While reducing LMI to one shiny dollar is rare among banks and other lenders, some banks offer a full waiver of LMI for loan-to-value ratios of up to 90% for certain professionals where the average income is relatively high and the job is fairly secure, such as doctors and surgeons.
Unfortunately, we’re not all doctors and lawyers, so it’s good to see there are other options out there.
As with any lending options, it’s always best to look at the overall lending costs, including other bank fees and charges for the duration of the loan. The biggest cost of all is the interest rate being charged. When comparing deals like this, be sure to look at the interest rate comparison with other products and be sure to compare each lenders overall offerings.
Comparison sites help and if you’re time-poor or would rather talk to an expert who looks at all the different home loan offerings day in and out, you might want to get help from a professional mortgage broker. I have a handful of stellar mortgage brokers within my network – you’re welcome to ask me for a recommendation. Mortgage broking is a free service to home buyers, and these days many are independent, so why not get a pro on your side?
There are so many savings options out there if you just do your research. Let’s get you your first home!