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May 23, 2015
As we make our way through life, we start to understand that some things are unavoidable, some might even say, necessary evils.
A necessary evil that makes its way insidiously into the life of a first home buyer who hasn’t been able to save the 20% deposit, is LMI. Yes, three letters that strike terror in the hearts of the already battered first home buyer.
So what is LMI? Lenders Mortgage Insurance. Emphasis on the word lender! Yes, you are paying to protect the bank’s position in case the deal goes bottom up.
I was drawn to the Herald Sun’s big bold title: Homes Hurdle. Of course, the article referred to LMI and how it has braisingly increased. According to the article, LMI rates have been steadily increasing since the GFC from 2.92% to 4.37% on the total sum. On a $650,000 property with a 5 per cent deposit, the LMI costs have risen by nearly $9000 from $18,000 to $27,000 over the past seven years.
How many first homebuyers have that sort of money lying around. What is particularly gauling about this is that these huge sums must be paid to look after the bank’s security, not yours! What often happens in this case is that the bank allows you to capitalise the LMI costs onto your loan, so if it costs you $10,000 in LMI costs, by the time you conclude your thirty year loan, that figure will have swollen to $17,499 at 4.15% interest!
The other factor is that there is not much competition in the arena of LMI lenders. The two big players are Genworth and QBE. Make the deduction…there’s simply not enough competition out there and the fees for LMI could continue their giddy ascent and squeeze even more buyers out of the market.
Building that 20% deposit is crucial, although, not easy. Home Addressed has looked at ways this can be done. We have created strategies such as housesitting where you can contact an owner who wants their house cared for whilst they are away. This creates an opportunity for you to save. Home Addressed has a number of other strategies that are smart and will see you save your deposit in no time. Refer to the website for more details.
I have saved the best till last. If you have managed to read to this point then you will discover that Home Addressed, ever mindful of assisting the first home buyer, is working towards providing the first home buyer with a way of accessing the elusive 20% deposit. Plans are afoot and the mechanics of this should be finalised within the next three to four months. It will mean that you can front up to the bank and confidently declare that you have your 20% deposit! This will be predominantly for house and land packages but could include apartments.
If you are interested in being contacted when this venture launches, then fill out the application form for the Home Addressed First Home Buyer Program and we will let you know when the program is ready to go. We anticipate the demand for this will be huge so get in early as we may not be able to accommodate all those who apply.
Go to: http://goo.gl/k9j1Ry