1. You need 20% deposit to buy your home or investment property
You don’t need 20% saved up to purchase your home or investment property. In an event you have saved up less than 20% deposit, you can borrow more than 80% of the value of the property and pay what’s called Lenders Mortgage Insurance (LMI). Whilst the LMI protects the lender, it lets you get into your home or investment property sooner.
For your home, you can do with as little as 5% of the value of the property as deposit, with the Loan to Value Ratio (LVR) being 98% including approximate 3% LMI.
For investment property, most lenders require you to have 12% deposit as a minimum, with the LVR being 90% including approximate 2% LMI.
2. You must save up a deposit in order to purchase property
Provided you qualify for the borrowing, you can have your parents go “guarantors” on your purchase. This way you can borrow up to 100% of the value of the property.
Once the value of your property increases, you can look at removing the guarantee on their property.
Ensure that you and your family members seek relevant legal advice
3. You have saved the deposit and now you can go shopping
Depending on whether you’re buying your home or investment property and depending on the price point consider the following costs:
– Stamp Duty
– Solicitor / Conveyancer Fee
– Building & Pest Inspection
If your home purchase is above the stamp duty concessions threshold or if your purchase is an investment property account for approximately 5% of the purchase price for these costs. For instance if your purchase is $400,000, besides the deposit, you will require approximately $20,000 for these purchase costs.
4. Credit Limits don’t matter as long as you keep your credit card clear
Credit limits do matter. Even if you don’t use your credit card, the bank considers the repayment to be 3% of the credit limits. So if you have a $10k credit card, the minimum repayment will be considered to be $300. Similarly, if you have $30k in credit cards, the minimum monthly repayment will be considered to be $900.
5. LMI will protect you
LMI is a borrowing cost and it protects the lender. However it lets you get into your home or investment property sooner. LMI can be added to the loan.
6. Going to the bank finance manager and the broker is the same thing and you get the same result
A bank finance manager can only address their own products. A broker has access to multiple products to compare on what suits your needs and goals. A property and investment savvy broker would be able to not only be to recommend the right product but also tailor advice to your needs, circumstances and goals
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Note: Please ensure you always seek specific specific credit, tax, financial, legal or investment advice. Property Twins' Blogs are not a substitute for personal and specific, taxation, financial, legal or investment advice
