Don’t let upfront costs steal your dream of owning a home
Owning your own home is a dream that most people want to make a reality sooner rather than later. A lot of effort and hard work goes into looking for the perfect home in the right area, organising finance and negotiating the sale, and if you do your homework, you can avoid unnecessary costs like lenders mortgage insurance. Consultation with settlement agent is highly recommended oceaniasettlements.com.au
What is Lenders Mortgage Insurance (LMI)?
Lenders Mortgage Insurance is an insurance policy that borrowers need to pay for to protect the lender from financial loss if the borrower can’t afford to meet their home loan repayments. In general, lenders require you to pay for LMI if your home loan deposit is less than 20% of the total value of your property. Please note that different lenders may have different rules, so it could be worth checking what your preferred lender’s policy is. If the lender requires you to take out LMI, you typically have to pay it upfront or it is added to your home loan, and it is non-refundable.
Planning ahead makes a big difference between paying mortgage insurance or not. Here are some tips to keep your dollars going towards your house:
1. Know the price you can afford
Lenders assess loans and affordability to estimate a maximum borrowing amount, but it is super important that you work out what you can afford and what repayments you feel comfortable with. Many lenders have a mortgage calculator on their websites that makes it easy for you to see how much your living costs are and how much you’ll be able to borrow.
2. Save a 25% deposit.
Once you know how much you can afford, use a home saver calculator service which shows you how much you need to save each fortnight in order to get to your deposit. https://www.westpac.com.au/personal-banking/home-loans/calculator/home-saver/#/time
By aiming for a 25% deposit you will be well and truly outside the LMI zone and you’ll have enough money for extra costs like stamp duty, and inspections.
3. Use a stamp duty and a mortgage insurance calculator.
Make sure you know what the stamp duty is in your state. Some states have concession waivers of the stamp duty associated with a property purchase, so you might not have to pay stamp duty. https://www.westpac.com.au/personal-banking/home-loans/calculator/stamp-duty-calculator/ or https://reiwa.com.au/advice/calculator-tools/
4. Get a good mortgage broker
A great mortgage broker can make a huge difference. They advocate on your behalf to get you the best lending options. At Oceania Settlements we work with a number of great Mortgage Brokers that can help you explore your financing options and help get you the best deal from lenders. Feel free to contact us for recommendations.
5. Get your existing home valued
If you already own a home, it can be beneficial to get the property valued by at least three valuers. This could make a difference when it comes to calculating the property value ratio and ensure that you don’t pay LMI.
If you don’t have much of a deposit saved up, you may be better off not entering the housing market yet, and to wait until you have saved up the 20% deposit that is required to avoid paying LMI. Click here to calculate all the costs involved in buying a home .
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