The deposit and lender's mortgage insurance
When it comes to purchasing land or property, try and aim for at least a 20% deposit. Anything less than 20% puts a client in what is known as the LMI space (Lender’s Mortgage Insurance). LMI is an insurance that aims to cover a lender’s losses in the event of a default on the loan. LMI can be paid upfront as a single payment, or built into the life of the loan. The important thing to remember is that it is a cost included on any loan application where the ratio of the deposit to the value of the land or property being purchased or built is less than 20%.
Alternatively, there is also an option for a limited guarantor loan, when another person or family member puts up a property they own and have equity in as security, allowing the applicant to borrow up to 100% of the purchase price of a home without needing a deposit and avoiding LMI.
If you have any questions on LMI, or want to discuss options for a limited guarantor loan, or options for consolidating debt to improve your capacity for a higher deposit, please give us an obligation free call.