First home - how to avoid LMI with 5-10% deposit

Discussion in 'Loans & Mortgage Brokers' started by fedex, 8th Apr, 2019.

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  1. fedex

    fedex Active Member

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    Hi guys,

    - I'm a first home buyer in VIC.
    - Currently rent
    - defacto relationship
    - Both work FT
    - 5-10% deposit
    - Looking to buy a $650k existing house

    Just wondering if there are any ways to avoid LMI with 5-10% deposit?

    Are there any lenders that allow a guarantor to secure the remaining deposit?

    Cheers
     
  2. Jess Peletier

    Jess Peletier Mortgages, Finance & Property Strategy Aust Wide Business Member

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    Hi Fedex, lots of lenders will allow a guarantor, but they all have different rules surrounding this it's best to get some specific advice to figure out which lender will work best in your scenario.

    Or, if it's actually best to pay the LMI - it can be, depending on your goals and plans.
     
  3. Peter_Tersteeg

    Peter_Tersteeg Finance broker and strategist Business Member

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    To purchase a $650,000 property, a first home buyer in VIC will have roughly $15,000 in additional purchase costs (stamp duty & other government fees, conveyancing, etc). You also need to factor this in, on top of your deposit.

    With a 10% deposit, various types of doctors (including vets and a few others), some solicitors and some accountants can get an LMI waiver with a limited number of lenders.

    With a 5% deposit, some of the above may be able to get an LMI waiver with one or two lenders. This type of loan is often bundled with a credit card or personal loan for 5% and can often cost more than the LMI might have.

    Another way to avoid paying LMI is to use a family guarantee, where a family member has a property with plenty of equity, such that the combined equity of both properties keeps the total LVR below 80%.

    Quite a few lenders offer a family guarantee, the most appropriate will depend on the circumstances. This can depend on the amount of equity in the guarantors property, or the guarantors financial circumstances and your own circumstances. There's no single answer to this question.
     
    albanga likes this.
  4. Paul@PFI

    [email protected] Tax Accounting + SMSF Business Plus Member

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    Tip - Seek a experienced broker to help determine all the options.
     
  5. property_geek

    property_geek Well-Known Member

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    Would lender consider only available equity from the guarantor or their serviceability has to be assessed too?
     
  6. Bendigus

    Bendigus Well-Known Member

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    A 600k home for first home buyer is exempt of Stamp duty.

    A 650k home for first home buyer has around 12k of Stamp duty.

    Convancing, building inspections, pest inspection etc may cost about 2k

    So if you can purchase for closer to 600k, then you'll save alot in fees.

    Where in Vic are you looking to buy? you may be eligible for 20k grant if the house regional and new. There's still a 10k available for metro properties under 5 years old i First Home Owner | State Revenue Office
     
  7. Peter_Tersteeg

    Peter_Tersteeg Finance broker and strategist Business Member

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    In a family guarantee, the lender takes the available equity in the guarantors property as additional security for the loan.

    Many lenders (but not all) do not require the guarantors serviceability to be assessed.
     
    [email protected] T likes this.
  8. Jamie Moore

    Jamie Moore MORTGAGE BROKER - AUSTRALIA WIDE Business Member

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    Only options are using a guarantor, using equity in an existing property (not an option if it's your first property purchase), obtaining a non-refundable gifted deposit (usually from a relative) or taking out a 90% no LMI loan (generally for medicos and some other professions).

    If none of the above are possible - then a good compromise might be to save a 12% deposit (plus costs). The LMI isn't ridiculously expensive when borrowing 88% of the purchase price.

    Cheers

    Jamie