Property Twins | Property Twins™
[rev_slider ]
In: Home Buyers, Property Investors0

Buying your first home or your first investment property is a huge investment, and saving a deposit may take a number of years.

Fortunately, where you have less than 20% of the deposit (say between 5% and 20% of the purchase price), you may be able to borrow by paying Lenders Mortgage Insurance (LMI).

LMI is a fee charged by lenders where you borrow more than 80% of the purchase price or market value on refinance. Note that LMI does not protect you, but it protects the lender’s interests, as the lender is at a higher risk due to the low deposit.

LMI is payable on settlement, and may be paid upfront, or added / capitalised to the loan.

What is best for you will depend on your goals and circumstances. For property investors, waiting for a 20% deposit may take a long time. This is an opportunity cost as it may prevent you having an exposure to rising values in property over a period of time. In this case, it is useful to make use of LMI to speed up your house purchase or investment property purchase.

For example, for a $450k house, at 20% deposit you need at least $90k deposit, and 5% in costs (e.g. stamp duty, solicitors fee etc) of $22,500. This requires you to save at least $112,500.

But, you have only saved $80k. Where you want to do a 20% deposit, you need to save a further $32,500. However, if you choose to take advantage of the LMI, you can put a 12% deposit of $54,000 plus costs of $22,500. That is you will use $76,500 of your savings, rather than $112,500. The LMI will be in addition to these funds, which may be added to the loan depending on your circumstances.


To Get Started: Schedule A Chat with the Property Twins Team
Join Our Exclusive Facebook Community of 6,000+ Property Investors: Property Addicts Australia
Join our Exclusive Search & Select The Right Property in 90 Days 5-Day challenge

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

Leave a Reply

Your email address will not be published. Required fields are marked *