Key Insights
- Lenders Mortgage Insurance (LMI) is an insurance policy charged by the lender when your deposit is less than 20% of the property’s value, but it enables you to secure a home loan with a smaller deposit.
- Explore schemes like the First Home Guarantee and the Family Home Guarantee, which assist eligible buyers in avoiding or minimizing LMI, providing viable pathways to home ownership.
- By understanding your options and seeking guidance, you can confidently navigate the property market and turn your dream of owning a home into a reality.
Are you a first-time home buyer in Australia eager to step into the property market but concerned about additional costs like Lenders Mortgage Insurance (LMI)? We understand the butterflies and hurdles that come with being a first-time buyer, which is why we’re here to walk alongside you and shed light on LMI and some fantastic government schemes that could make your journey smoother.
Our in-house finance team at Westgate Finance (ACL 410232) are the best at finding the right finance solution for you, if you would like to know more about LMI and if you can avoid paying it fill out the form below.
What is Lenders Mortgage Insurance (LMI)?
Lenders Mortgage Insurance (LMI) is an insurance policy charged by lenders/banks when the borrower’s deposit is less than 20% of the property’s value. It protects the lender in case the borrower defaults on their mortgage/ misses their mortgage repayments. While LMI can increase upfront costs for buyers, it enables them to secure a home loan with a smaller deposit.
Impact on Borrowers
LMI can add thousands of dollars to the upfront costs of purchasing a property, potentially delaying or deterring prospective buyers from entering the market. However, it’s important to weigh the benefits of homeownership against the cost of LMI, as owning a property can offer long-term financial stability plus you will have your own place to call home. Calculate using the how much can I borrow calculator.
How to calculate lenders mortgage insurance
The cost of LMI varies depending on factors such as the loan amount, loan-to-value ratio (LVR), and the borrower’s financial profile. Typically, borrowers with smaller deposits or higher LVRs are subject to higher LMI premiums. Don’t stress too much asking yourself ‘how much does Lenders Mortgage Insurance (LMI) cost?’, our own finance experts at Westgate Finance have got your back! They use tailored LMI calculators to figure out how much you might need to pay, allow them to do their thing and discover the perfect option for you. (This could mean checking if you’re eligible for awesome government schemes like the First Home Guarantee or the Family Home Guarantee, which could mean big savings for you.)
How to avoid Lenders Mortgage Insurance
While LMI can be a significant expense, there are strategies buyers can employ to mitigate its impact. These include saving for a larger deposit, exploring government assistance/grants, such as the First Home Guarantee, and seeking advice from mortgage brokers or financial advisors.
Lenders Mortgage Insurance Calculator
Calculating LMI is handled by our in-house team at Westgate Finance, Find out if you are eligible for LMI or if you can avoid paying it by contacting our team using the form below.
How to potentially get out of paying LMI
Fortunately, several government schemes are designed to assist first home buyers in avoiding or minimizing LMI.
Keystart Home Loans
Who is this suited to: Keystart is designed to make home ownership more achievable. If you’re facing challenges in saving for a deposit or securing a traditional home loan, Keystart home loans may be an option for you.
What is it: Keystart is a WA Government initiative designed to help get you into your new home faster by lowering the entry costs. You can get into a home of your own with as little as a 2% deposit, there is no Lenders Mortgage Insurance and no monthly account fee’s.
First Home Guarantee
Who is this suited to: The First Home Guarantee (FHBG) is an initiative by the Australian Government aimed at assisting eligible first home buyers in achieving home ownership sooner.
What is it? The FHBG, Housing Australia provides a guarantee on a portion of the home loan obtained from a participating lender. This allows buyers to secure a home with as little as a 5% deposit, all without the burden of paying Lenders Mortgage Insurance (LMI). The Guarantee serves as a security for the lender, reducing risks associated with low-deposit loans.
How many places are available? With 35,000 places available from July 1, 2023, to June 30, 2024, the FHBG presents a significant opportunity for aspiring homeowners to confidently enter the property market.
Family Home Guarantee
Who is this suited to: The Family Home Guarantee (FHG) is designed to assist eligible single parents or legal guardians in purchasing a home, regardless of whether they are first home buyers or have owned a home previously.
What is it? Under this scheme, Housing Australia guarantees a portion of the home loan obtained from a participating lender, enabling eligible buyers to purchase a home with as little as a 2% deposit without the requirement of paying Lenders Mortgage Insurance. The Guarantee is not a cash payment or deposit for a home loan and can cover up to a maximum of 18% of the property’s assessed value by the participating lender.
How many places are available: From July 1, 2023, to June 30, 2024, 5,000 FHG places are allocated.
While Lenders Mortgage Insurance (LMI) can present an initial hurdle for first-time home buyers, it’s essential to chat to the team at Westgate finance to explore your options and see if you are eligible for the various government schemes available. Programs like Keystart, the First Home Guarantee and the Family Home Guarantee offer viable pathways to home ownership with minimal deposit requirements and without the burden of LMI. By understanding these options and seeking guidance from professionals, you can navigate the property market with confidence and turn your dream of owning a home into a reality.
With your newfound understanding of LMI, dive right in with our Easystart First Home Buyer Guide this comprehensive information tackles finances, and property search, and even helps you unlock eligibility for valuable government programs. Take the first step today to see if you’re eligible for these valuable government initiatives and unlock the door to your future home! Send us an enquiry today 🏠👌
