Wanting to purchase a new property? Here are some things to consider when it comes to setting a savings goal.
Once you know the type of property you want, and have a rough idea of what it’s likely to cost, it’s time to set a target for saving a deposit.
Ok, a bit of an obvious one but the more you can save for your deposit the less of a ‘risk’ you are for lenders. You should aim to get as close to a 20% deposit as you can but don’t panic if this feels unachievable as your broker can discuss other options available to you.
The way you build your home loan deposit also has a lot of merit. If you can show a consistent track record of employment and a history of regular savings in your bank account it will make it easier for you to get loan approval. If you can also show how much rent you currently pay each week whilst you have been saving that will assist because it demonstrates your ability to make similar mortgage repayments.
Low deposit home loans
As a general rule you will require at least 5% of the purchase price as a deposit. Each lender has different requirements for low deposit home loans so your broker can talk you through the options suitable for you.
If your deposit is less than 20% you may need to pay Lenders Mortgage Insurance (LMI), or get a guarantor as security.
Lenders Mortgage Insurance. The ins and outs.
If you are wanting to borrow a high percentage of a property’s value (generally over 80%), if your income is not consistent or you are self-employed you may be required to have Lenders Mortgage Insurance (LMI).
What is it?
LMI must be paid by you (the buyer), but protects the lender if you are unable to repay your loan and the sale of the property doesn’t cover the outstanding loan balance.
What does this mean for me?
LMI is a one-off fee that can be subtracted from your loan or paid up-front.
Your Loan Market mortgage broker I can advise you if you require LMI and do all the paperwork for you. Phew! You may also be able to borrow more or buy sooner than you thought.