4 ways to stop renting and purchase your home sooner (with LMI)
LMI can be a useful pathway to help you get on the property ladder. We take a look at how it can be leveraged.
Looking to make the jump from renting to owning your own home?
Lenders Mortgage Insurance (LMI) can help fast-track you into your own home sooner than you think.
LMI can allow you to buy a home with less than a 20% deposit. This means that you could potentially buy a home with the deposit you have available now.
Even more importantly, you may be able to stop paying rent and start building greater financial security.
Let's look at how LMI can accelerate your home ownership journey.
1. Reduce your saving time drastically
One of the biggest challenges aspiring home buyers face is saving for a deposit.
Rising rents make it tougher to save – and even in a best-case scenario, it's going to take years to save enough for a 20% deposit.
It can feel like getting into your own home is just too hard and out of reach.
There are options available, though.
Rather than having to save up a deposit of 20% of the purchase price, LMI can get you into a home sooner with as little as 5% of the purchase price.
While this doesn't include other upfront costs such as stamp duty and legal fees, it can still make home ownership much more achievable.
Tools like Helia's Deposit Comparison Estimator allow you to compare your options with your current savings. You can get insights as to whether you're in a good position to buy now with the deposit you have saved, or whether you would be better off saving for longer.
2. Enhance your borrowing power and opt for a better home
When purchasing your first property, there's often a focus on just buying what you can afford, rather than buying closer to your ideal property.
Using LMI can also open up your buying options and boost your borrowing power. In turn, you may be able to aim higher with the properties you're considering.
You could rethink which suburb you are planning to buy in, as well as the features of the property. Maybe you've always wanted an extra bedroom, a study, a pool or room for a home gym.
Support from LMI can help you to get a loan approved. But you will still need to demonstrate that you have a good credit history and that you are able to afford your home loan repayments.
Being able to demonstrate consistent savings habits, providing proof of income and ability to repay the loan are still required.
A mortgage broker or home lending representative can consult with you to give you an idea of what sort of features you're looking for before you apply for a home loan.
3. Take advantage of lower house prices and stop paying rent
Given the reported dip in house prices in some areas, many aspiring first home buyers are considering whether now is a good time to buy.
A fall in house prices can mean that you are better off purchasing now. Additionally, you may be able to get a better home or get into a better suburb.
It also gives you a headstart on investing in your financial future. By making home loan repayments instead of paying rent to a landlord, that money is working for you and building equity into your own home.
The equity in your home is the difference between its market value and your remaining home loan balance. To put it simply, this is the value of what you currently own in your own home.
The value you build over time means that you are increasing this equity. Definitely beats paying off your landlord's home loan.
However, before you make any major financial decision, it's a good idea to consult with a finance professional.
4. Flexible LMI options such as monthly repayments
LMI does add some additional costs to your loan. However, over time these costs will likely be offset by the increasing equity you have built in your home.
You also don't have to use your deposit for paying LMI. There are options such as a monthly LMI fee or adding the fee into your home loan amount.