Getting home sooner – How LMI can make it happen – CASE STUDY
Anna and Stephan, in their early 30’s with one young child, wanted to purchase their own home and stop having to pay rent.. Since having Crystal it was harder to save but they had still managed to build a 5% deposit plus stamp duty. Their challenge was in finding a lender to approve the 95% loan-to-value ratio (LVR) loan they needed for their dream home. And the longer they waited, the higher house prices were likely to rise:
“We’d calculated we could afford about $600,000 but every weekend looked the same: another auction, a higher sale price,” said Stephan.
From a combined income of $160,000, rent was costing them $600 —every week. Believing that this money should have been going towards a mortgage, they decided to consult a lender about their options. Pleasingly, Anna and Stephan learnt they could buy a home with their 5% deposit by using Lenders Mortgage Insurance (LMI) provided by Genworth Financial on a high LVR loan.
LMI offsets the risk a lender takes on a low deposit loan and lets them offer mortgages above 80% of the security property value. Lenders usually pass the cost of LMI on to the borrower, but this amount can often be capitalised into a loan*; adding only a small additional cost each month to mortgage repayments. Anna and Stephan could readily meet their mortgage repayments, so LMI enabled them to buy and then start watching the value of their home grow—instead of standing on the sidelines.They’ve been in their home for six months and couldn’t be happier. “Nothing beats having your family under a roof that you own, but 12 months ago I couldn’t have imagined everything turning out this well. LMI made owning our home happen so much quicker,” said Anna.
* Not all lenders allow capitalisation of LMI. Please contact a Naritas Credit Adviser to find out more.
LMI protects the lender if a borrower is unable to meet their mortgage repayments and the property has to be sold for less than the amount owed to the lender. Traditionally, lenders require borrowers to have at least a 20% deposit, however, by using LMI, lenders are able to offer lower deposit home loans. As LMI protects lenders from risk of mortgage default, it enables them to read more>>