For many Australians looking to buy their first home, the idea of saving for a 20% deposit, on top of transaction fees such as lenders mortgage insurance (LMI), can feel like an insurmountable task.
In welcome news for first home buyers (FHBs), the option to avoid a lump sum LMI payment is now available, with Resi Mortgage Corporation offering a monthly LMI premium solution.
Unlike traditional LMI, which needs to be paid upfront (at loan settlement), Resi is offering home buyers an option to pay the cost of LMI by the month on their Resi Essential Options Home Loan.
A key benefit to first home buyers is that Monthly Premium LMI doesn’t impact the loan-to-value ratio (LVR), which means you may be able to borrow up to 95% of the market value of the property.
Yellow Brick Road executive Chairman Mark Bouris says that the Monthly Premium LMI solution could be the difference between a first home buyer being empowered to enter the market now, rather than down the track.
“We want to help more Australians achieve their dream of homeownership,” said Bouris.
“It’s no secret that the biggest challenge for most first home buyers is saving for a 20% deposit, not whether they can afford the home loan repayments.
“So, we partnered with Helia, our LMI provider, to offer our customers who are buying their first home the flexibility to pay for LMI monthly. Because the monthly LMI fee doesn’t affect your LVR, a greater portion of your loan can be used to buy your home, which means it might make the difference between buying your home now instead of in another year or two.”
The Helia First Home Buyer Report 2022, indicates that the length of time to save a 20% deposit for a medium home in Sydney is 17 years and in Melbourne is 10 years. As a result, the number of FHBs aiming for a 20% deposit has fallen to roughly 25% of all FHBs, compared to approximately 41% in 2019, according to the report.
Helia chief commercial officer LMI Greg McAweeney said he was very excited about the partnership with Resi to launch its monthly premium LMI offering to the market.
“LMI plays a critical role in supporting Australians to accelerate their financial security through home ownership,” McAweeney said. “We are proud to bring innovation, flexibility and the choice to pay monthly to people wanting to buy a home with our monthly premium LMI solution.”
McAweeney said that another key advantage of their new product offering through Resi is that unlike traditional methods of paying the bank an upfront fee for LMI, once the LVR on the property drops below 75%, the monthly premium payments will stop.
“Let’s say for example you receive a bonus or an inheritance that you use to pay down your mortgage and reach the 75% LVR quicker than you expected. Unlike if your LMI fee is capitalised into your loan, you’ll be able to stop paying the premiums and potentially save money.”
Through Resi’s Essential Options monthly LMI premium, first home buyers have the opportunity for a much more cost effective solution for first home buyers.
To download the LMI fact sheet, click here.