How to Protect Your Home

Rates and Fees verified correct on February 20th, 2017

home-insurance

How to protect your home for the future

It's likely that your home is the most expensive asset that you'll purchase in your lifetime. Protect the asset that you've worked so hard for by taking the right steps to protect it for you and your family. As part of their lending criteria, most Australian lenders require that security properties are insured against loss or damage, and that you also take out building insurance.

Insurance is also crucial if you plan on accessing your equity in the future, as you are borrowing against your home. You will need to maintain adequate insurance on the property and keep it in a good condition. You may also need to obtain your lender's approval for other people to reside in your property if need be.

It's important to note that when choosing an insurance policy, the circumstances of every person and situation is different. Speak to an insurance broker to discuss your specific needs.

Home and contents insurance

Insuring is the most common method of managing the potential risk of loss or damage. It can apply to an individual or property and it works by transferring the risk to an insurance company, in return for a payment which is known as a premium. Your household will typically pay lump sums on a regular basis to protect against an event if it results into some element of financial hardship. The most common type of insurance used to protect properties is home and contents insurance.

The cost of insurance is considered as an expense when a lender is assessing your financial position and is also considered as a 'financial need' within the household. If you already own a property and you're using it as a security property, you'll be asked to provide your insurance details.

Home and contents insurance is considered a medium-term insurance need and generally comes under 'general insurance'. This type of insurance tends to cover the concerns of individuals and household, as well as renewed on a yearly basis depending on whether or not the risk continues. Premiums increase and decrease each year, depending on your circumstances. Home and contents insurance allows you to operate with the peace of mind in knowing that your asset is protected in the event of financial hardship or an unexpected event.

A general insurance contract is usually called a policy and this contains the terms of the agreement or the product disclosure statement.

  • Where can I get home and contents insurance? Your lender should be able to recommend general insurance to you, but be mindful that in some cases they may get a commission for this so you might also want to compare a range of insurance providers yourself.
Building (home) insurance

This cover provides protection against damage or destruction to residential buildings such as flats, units, townhouses and houses. Generally, building (home) insurance also includes other structures such as garages, sheds, fences and decks. Lenders require this as the minimum insurance when using a property as security.

Contents insurance

Often combined with home insurance, contents insurance covers loss or damage to domestic goods or property that you own. It may cover goods that an insured person buys as well.

Owner-builder insurance

This type of insurance protects owner-builders from losses during the process of building or construction. This cover is usually optional under a standard building policy or could be required to be taken out as a separate policy.

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Lender's Mortgage Insurance (LMI)

Loans that are attached with a security, such as a home loan, are generally insured regardless of the loan to value ratio (LVR) or the loan amount. The borrower generally pays LMI on full documentation loans when the LVR is above 80% and the lender pays LMI when the LVR is less than 80%. For low documentation loans, the LVR is around 60%.

LMI protects the lender in the event that you default on your loan, or you're unable to meet your repayments. If the borrower decides to sell the home and there is a shortfall in the funds, the insurer pays out the outstanding balance. Some major Australian LMI providers are QBE and Genworth Financial.

The type of loan and its conditions offered to you are often influenced by the LMI provider and their individual criteria. If LMI is required, the decision of the insurer is pivotal to your loan approval. In some cases, a loan might be provided but with additional assets used as security. This may include additional real estate or establishing another guarantee.

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Protecting your investment property

As many investment property loans exceed 80% LVR, additional security or LMI is often required. Lenders will generally allow up to 95% LVR for loans with LMI. Some lenders will let you use your current home as security and depending on its value, and the amount of equity you have, this could mean that you avoid paying LMI.

Landlord insurance

This may be available as an option under building insurance or taken out as a separate policy. It protects landlords even further against events such as malicious acts and theft by the tenants or financial losses should the tenant fail to pay their rent.

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Tips for protecting your home

  • Consider income protection. Maintain the stability of your income by taking out income insurance. This ensures that you continually receive an income should anything happen to your ability to work.
  • Maintain a cash buffer. It's best to keep some equity or liquid assets handy as one of your risk management measures so that you can prepare for unexpected emergencies.
  • Lock in your interest rate. While there is the risk that you won't benefit if interest rates fall, a fixed interest rate eliminates any future guesswork as to what your repayments will be in the future. This can help with future budgeting and financial planning.
  • Beware of cross-collateralisation. This is when the liabilities from one asset are woven into the liabilities of another. One example is when you use the capital appreciation from one property to finance another property. If you can't meet your repayments with one asset, this could ripple through your debt structure which could harm your entire portfolio.
  • Use a trust. This is a legal entity that can own a property and has beneficiaries that identifies where the returns of the investment go. A benefit of a trust is that if a debtor takes action against you, the trust is protected. If your property assets are owned by a trust only the creditors of the trust can take legal action.
  • Consider a pre-nup. While it's a topic that makes us uncomfortable, if you're getting married or you're in a long-term relationship and you want to ensure that your assets stay protected, then this can provide you with added security. A pre-nup states how the assets will distributed should a marriage breakdown occur.
  • Make sure your will is up to date. If you ensure that your will is up to date, it can protect your assets and ensure that they are distributed how you would like them in the event that you pass away.
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Compare home loans

Rates last updated February 20th, 2017
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Interest Rate (p.a.) Comp Rate^ (p.a.) Application Fee Ongoing Fees Max LVR Monthly Payment
HSBC Home Value Loan - Resident Owner Occupier only
Enjoy the low variable rate with $0 ongoing fee and borrow up to 90% LVR.
3.75% 3.77% $0 $0 p.a. 90% Go to site More info
loans.com.au Essentials - Variable (Owner Occupier, P&I)
A low-interest rate loan suited for purchases and refinances with no application or ongoing fees.
3.59% 3.61% $0 $0 p.a. 80% Go to site More info
Greater Bank Ultimate Home Loan - Discounted 1 Year Fixed LVR ≤85% ($150K+ Owner Occupier)
Discount off an already competitive interest rate for loans over $150k. NSW, QLD and ACT residents only.
3.59% 4.42% $0 $375 p.a. 85% Go to site More info
State Custodians Standard Variable Spring Special - LVR 80% (Owner Occupier)
Special Owner Occupier Rate. Free Offset Account.
3.59% 3.92% $0 $299 p.a. 80% Go to site More info
Newcastle Permanent Building Society Premium Plus Package Home Loan - New Customer Offer ($150,000+ Owner Occupier)
Apply for a new owner occupier loan or refinance from another lender and receive this discounted rate.
3.74% 4.12% $0 $395 p.a. 95% Go to site More info
IMB Budget Home Loan - LVR <=90% (Owner Occupier)
A competitive budget rate without any unwanted bells and whistles.
3.87% 3.92% $445 $0 p.a. 90% Go to site More info
loans.com.au Offset Variable - Up to 80% LVR (Owner Occupier P&I)
Take advantage a 100% offset account along with no annual or application fee.
3.67% 3.69% $0 $0 p.a. 80% Go to site More info
NAB Choice Package Home Loan - 2 Year Fixed (Owner Occupier)
A fixed rate package loan with flexible repayments options. $1,500 cashback offer available, terms and conditions apply.
3.98% 4.92% $0 $395 p.a. 95% Go to site More info
CUA Fresh Start Basic Variable Home Loan - Owner Occupier
A basic mortgage with flexible repayments options.
3.89% 3.94% $600 $0 p.a. 90% Go to site More info
Switzer Home Loan
No upfront or ongoing fees and a competitive variable rate for owner occupiers.
3.89% 3.89% $0 $0 p.a. 90% Go to site More info
Newcastle Permanent Building Society Fixed Rate Home Loan - 2 Year Fixed (Owner Occupier Special Rate)
A limited time 2 year fixed rate for owner occupiers. Conditions apply.
3.89% 4.79% $0 $0 p.a. 95% Go to site More info
3.85% 4.26% $0 $395 p.a. 80% Go to site More info
State Custodians Breathe Easy Spring Special  - LVR 80% (Owner Occupier)
No application or monthly fees. Includes offset feature.
3.72% 3.75% $0 $0 p.a. 80% Go to site More info
Bank Australia Basic Home Loan - Variable (Owner Occupier)
A competitive variable that allows borrowers to borrow a minimum of $100,000 with a $0 ongoing fee.
3.79% 3.83% $0 $0 p.a. 80% Go to site More info
Auswide Bank Home Loan Plus with Freedom Package - Special Package Discount LVR <= 90% (Owner Occupier) P&I
A high maximum LVR home loan with redraw facility and additional payments.
3.79% 4.18% $0 $395 p.a. 90% Go to site More info
Online Home Loans Standard Variable - Owner occupier
A variable rate home loan for owner occupiers with a 100% offset account.
3.74% 3.75% $275 $0 p.a. 80% Go to site More info
CUA Fixed Rate Home Loan - 2 Year Fixed (Owner Occupier)
A fixed home loan with no ongoing fees and flexible repayments options.
3.84% 4.59% $600 $0 p.a. 95% Go to site More info
Australian Unity Kick Starter Home Loan
$0 ongoing service fees, maximum 80% LVR and a linked transaction account.
3.79% 3.82% $600 $0 p.a. 80% Go to site More info
Newcastle Permanent Building Society Fixed Rate Home Loan - 3 Year Fixed (Owner Occupier Special Rate)
A limited time fixed rate home loan with extra repayment abilities. Conditions apply.
3.99% 4.73% $0 $0 p.a. 95% Go to site More info
IMB Accelerator Home Loan  - LVR <=80% $300k+ (Owner Occupier)
A two year discounted rate which reverts to an ongoing life of loan discount afterwards.
3.74% 4.49% $445 $0 p.a. 80% Go to site More info
3.94% 4.33% $0 $395 p.a. 90% Go to site More info
Bank Australia Premium Home Loan Package - 2 Year Fixed (Owner Occupier) LVR < 80%
A discounted 2 year fixed rate loan with high maximum LVR and no application fee.
3.69% 4.31% $0 $350 p.a. 95% Go to site More info
3.79% 3.84% $600 $0 p.a. 95% Go to site More info
Newcastle Permanent Building Society Fixed Rate Home Loan - 2 Years Fixed (Owner Occupier)
Enjoy a low interest rate and borrow up to 95% (with LMI) of your home value.
4.49% 4.90% $0 $0 p.a. 95% Go to site More info
loans.com.au Essentials - Smart Loan Package P&I
This competitive rate is only available if you package your investment loan with your owner occupier loan.
3.59% 3.61% $0 $0 p.a. 80% Go to site More info
Greater Bank Great Rate Home Loan - Discounted Variable ($150K+ Owner Occupier)
A competitive rate with redraw facility. NSW, QLD and ACT residents only.
3.89% 3.89% $0 $0 p.a. 85% Go to site More info
Bank Australia Premium Home Loan Package - LVR<=80% $700k + (Owner Occupier)
Enjoy the discounted interest rate with redraw facility and no ongoing fees.
3.82% 4.17% $595 $350 p.a. 95% Go to site More info
State Custodians Standard Variable Spring Special - LVR 90% (Owner Occupier)
A special rate for owner occupiers with free 100% offset account and no application fee.
3.69% 4.02% $0 $299 p.a. 90% Go to site More info
AMP Essential Home Loan  -  $40,000 to $99,999 (Owner Occupier, P&I)
Take advantage of a redraw facility, competitive variable rate and no application or settlement fees for a limited time.
4.55% 4.57% $350 $0 p.a. 90% Go to site More info
Newcastle Permanent Building Society Fixed Rate Home Loan - 1 Year Fixed (Owner Occupier)
Get a short term fixed rate for that investment property with no application or ongoing fees.
4.49% 4.95% $0 $0 p.a. 95% Go to site More info
ME Flexible Home Loan Fixed - 3 Year Fixed Rate (Owner Occupier)
A competitive 3 year fixed rate with a redraw facility and split loan options, plus no application fee.
4.09% 4.80% $0 $0 p.a. 95% Go to site More info
Australian Unity Health, Wealth and Happiness Package - (Owner Occupier)
Get a 0.60% discount on your rate, a 100% offset account and no ongoing fees.
4.05% 4.08% $600 $0 p.a. 90% Go to site More info
NAB Base Variable Rate Home Loan - Owner Occupier (P&I)
A competitive no frills home loan with no application fees for a limited time. $1,500 cashback offer available, terms and conditions apply.
4.10% 4.14% $600 $0 p.a. 95% Go to site More info
Australian Unity Wealth Builder Investor Package Home Loan - Variable
An investment loan with no ongoing fees and borrow up to 90% LVR.
4.19% 4.22% $600 $0 p.a. 90% Go to site More info
Newcastle Permanent Building Society Fixed Rate Home Loan - 3 Years Fixed (Owner Occupier)
Split your loan for free with one of the lowest fixed home loan rates.
4.59% 4.89% $0 $0 p.a. 95% Go to site More info
NAB Choice Package Variable Rate - $250k to $749,999 P&I (Owner Occupier)
A great variable package from NAB which includes offset and redraw features. No application fee.
4.40% 4.79% $0 $395 p.a. 95% Go to site More info
IMB Essential Home Loan - LVR <=90% (Owner Occupier)
Get a discount on your rate and flexible repayment options with this loan.
4.09% 4.09% $0 $0 p.a. 90% Go to site More info
NAB Choice Package Home Loan - 5 Year Fixed (Owner Occupier)
A competitive loan with flexible features. $1,500 cashback offer available, terms and conditions apply.
4.59% 5.02% $0 $395 p.a. 95% Go to site More info
ANZ Simplicity PLUS Basic Home Loan - Special Offer (Owner Occupier)
Enjoy a home loan with no aplication fee or ongoing fee.
4.03% 4.07% $0 $0 p.a. 95% Enquire now
3.88% 3.89% $600 $0 p.a. 90% Enquire now
Westpac Flexi First Option Home Loan - 3 Years Introductory Special Offer (New Owner Occupier, P&I)
A limited time deal for new owner occupiers. Advertised rate includes 1.03%p.a. discount for the first two years.
3.99% 4.37% $0 $0 p.a. 95% Enquire now
St.George Basic Home Loan - Promotional Rate (Owner Occupier, P&I)
A no frills loan with a competitive rate and a maximum LVR of 95%.
4.08% 4.09% $0 $0 p.a. 95% Enquire now
Commonwealth Bank Wealth Package Fixed Home Loan - 2 Year Fixed (Owner Occupier) P&I
A package home loan with fee free extra repayments available during the fixed term.
3.99% 5.00% $0 $395 p.a. 95% Enquire now
St.George Fixed Rate Advantage Package -  2 Year Fixed Rate (Owner Occupier, P&I)
A discounted package rate for owner occupiers with the ability to package a Qantas rewards earning Amplify credit card. $1,500 cash back available for refinancers, conditions apply.
3.99% 5.04% $0 $395 p.a. 95% Enquire now
Westpac Fixed Options Home Loan Premier Advantage Package - 2 Years
A low interest rate home loan and competitive two year fixed rate.
4.19% 5.32% $0 $395 p.a. 95% Enquire now

Frequently asked questions

What would be a good solution to protect my home against courts or creditors should anything happen to me?

There is the option of putting your home into a trust but there are a number of tax implications you'll need to consider. Speak to your accountant about what structure best suits your needs.

What's builders warranty insurance?

As a licensed or owner-builder within Australia, you may need insurance to meet certain regulations. This includes cover triggered by the death of a builder, disappearance of the builder and insolvency of the builder.

Shirley Liu

Shirley is finder.com.au's publisher for banking and investments. She has completed a Masters in Commerce (Finance) and is the author of hundreds of articles. She is passionate about helping Aussies make an informed decision, save money and find the best deal for their needs.

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Related Posts

HSBC Home Value Loan - Resident Owner Occupier only

Enjoy the low variable rate with $0 ongoing fee and borrow up to 90% LVR.

loans.com.au Essentials - Variable (Owner Occupier, P&I)

A competitive interest rate home loan with interest only options. Interest rate 3.59%p.a.
comp rate of 3.61%p.a.

Greater Bank Ultimate Home Loan - Discounted 1 Year Fixed LVR ≤85% ($150K+ Owner Occupier)

Discount off an already competitive interest rate for loans over $150k. NSW, QLD and ACT residents only.

Newcastle Permanent Building Society Premium Plus Package Home Loan - New Customer Offer ($150,000+ Owner Occupier)

Apply for a new owner occupier loan or refinance from another lender and receive this discounted rate.

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