Saving for a 20% house deposit can feel like trying to train a playful Labrador—it requires patience and persistence.
If that’s not your style, Lender’s Mortgage Insurance (LMI) might be an option to consider. But how much does LMI add to your home’s cost, and is there a way to avoid it?
LMI is insurance that protects your lender if you find yourself unable to make your home loan payments. It’s generally required when your deposit is less than 20%, which is a common scenario today due to rising property prices. A recent study highlighted that 84% of Australians saving for a deposit find it challenging to meet the 20% requirement.
With the national median property price now at $973,300, an increase from $949,400 last December, it’s crucial to understand how LMI works and explore ways to reduce or eliminate this cost.
How Much LMI Could You Pay?
Typically, LMI costs range from 1% to 2% of your total loan value, heavily influenced by your deposit size and loan amount. For instance, buying a $500,000 apartment with a 10% deposit could result in an LMI cost of approximately $8,680. On the other hand, for a $1,500,000 property with a $150,000 deposit, LMI could cost up to $36,480.
Strategies to Manage or Avoid LMI
- Talk to Us: While you can’t shop around for LMI like other insurances, different lenders use various insurers, leading to cost variations. We can provide insights into LMI premiums for different lenders, potentially saving you money.
- Pay LMI Off Gradually: Instead of a lump sum payment, some lenders allow LMI to be incorporated into your loan balance, spreading the cost over time. This can slightly increase monthly repayments, but it offers more manageable payments.
- Explore Waiver Opportunities:
- Professional Privileges: Some professions, such as doctors and engineers, may be eligible for LMI waivers.
- Home Guarantee Scheme: This government initiative allows eligible buyers to purchase with reduced deposits and no LMI.
- Family Guarantor: A family member can offer security with their home equity, effectively boosting your deposit to 20%.
Ready to Learn More? Contact Me
If saving a 20% deposit seems daunting, reach out to me today. I can guide you through the potential costs of LMI and explore options to minimise or avoid it altogether.
Looking forward to assisting you in making your home-buying journey smoother.
0447654321
