How to Protect Your Home

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 October 23rd, 2017
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Loan purpose
Offset account
Loan type
Your filter criteria do not match any product
Name Product Interest Rate (p.a.) Comp Rate^ (p.a.) Application Fee Ongoing Fees Max LVR Monthly Payment Short Description
3.64%
3.66%
$0
$0 p.a.
80%
A basic home loan with a competitive rate and low fees.
3.65%
3.66%
$0
$0 p.a.
90%
Enjoy a low variable rate with no ongoing fees and borrow up to 90% of the value of the property.
3.49%
4.47%
$0
$375 p.a.
90%
Discount off an already competitive interest rate for loans over $150k. NSW, QLD and ACT residents only.
3.54%
3.56%
$0
$0 p.a.
80%
For new home buyers only. No refinance option. A low interest variable home loan with no application fee and free redraws.
3.64%
3.66%
$0
$0 p.a.
80%
A home loan with a competitive variable rate, limited fees and plenty of flexibility.
3.69%
3.72%
$0
$0 p.a.
80%
A low rate home loan with no ongoing fees.
3.65%
4.84%
$0
$395 p.a.
90%
A 2 years fixed platinum package that has $0 application and a loan redraw facility.
3.69%
4.86%
$0
$395 p.a.
90%
A special rate for first home buyers buying residential property and borrowing over $150K. 350K NAB Rewards Points offer available. Terms and conditions apply.
3.73%
3.73%
$0
$0 p.a.
90%
A special limited time offer for owner occupiers. An IMB Transaction Account must be opened with this loan.
3.74%
3.74%
$0
$0 p.a.
80%
A basic owner-occupier home loan with a low variable rate that requires a 20% deposit.
3.69%
4.15%
$395
$0 p.a.
80%
A one year fixed rate offer with no ongoing bank fees.
3.74%
3.75%
$0
$0 p.a.
80%
A special variable rate home loan with no application or ongoing fees.
3.68%
3.83%
$0
$10 monthly ($120 p.a.)
80%
A low interest rate home loan that allows borrowers to borrow up to 80% of the property value.
3.79%
3.92%
$0
$10 monthly ($120 p.a.)
80%
A competitive variable rate home loan with flexible features. You can earn 30,000 Velocity Points for every $100k you borrow (for a limited time, subject to eligibility requirements).
3.72%
3.74%
$0
$0 p.a.
80%
Take advantage of a 100% offset account along with no annual or application fees.
3.94%
4.88%
$0
$0 p.a.
95%
Enjoy a low interest rate and borrow up to 95% (with LMI) of your property's value.
3.72%
3.75%
$600
$0 p.a.
80%
A maximum 80% LVR home loan with no ongoing service fees and a linked transaction account.
3.74%
3.74%
$0
$0 p.a.
80%
Combine a low variable interest rate and free redraw with no application or ongoing fees.
3.77%
3.81%
$200
$0 p.a.
95%
A basic home loan with a low interest rate and a redraw facility available.
3.74%
4.15%
$0
$395 p.a.
80%
Enjoy a discount of a competitive interest rate and 100% offset account.
3.85%
4.97%
$300
$10 p.a.
95%
3.69%
3.75%
$600
$0 p.a.
80%
A low interest rate variable home loan with no ongoing fees.
3.69%
4.08%
$0
$395 p.a.
90%
A high maximum LVR home loan with redraw facility and additional payments.
3.79%
4.00%
$0
$10 monthly ($120 p.a.)
90%
Get a competitive interest rate for 3 years and a discounted variable rate when the fixed period ends.
3.81%
3.81%
$0
$0 p.a.
80%
A home loan with a competitive rate and plenty of handy features.
3.74%
3.74%
$0
$0 p.a.
90%
A competitive variable rate with a redraw facility. NSW, QLD and ACT residents only.
3.83%
3.83%
$0
$0 p.a.
70%
A special low variable rate for owner occupiers with 100% offset account and no application or ongoing fees.
3.84%
3.84%
$0
$0 p.a.
110%
Requires a family member to act as guarantor. Discounted rate available with family pledge loans. Family pledge loans require no LMI and no deposit. NSW, Qld and ACT only.
3.85%
4.10%
$500
$0 p.a.
95%
Apply for Easy Street fixed rate home loans and get a competitive loan with a fixed interest rate.
3.86%
3.87%
$0
$0 p.a.
80%
Pay no ongoing fees on a competitive variable rate home loan.
3.88%
4.89%
$0
$395 p.a.
95%
A fixed rate package with flexible repayment options. 350K NAB Rewards Points offer available. Terms and conditions apply.
3.96%
3.98%
$0
$0 p.a.
90%
Take advantage of a redraw facility, competitive variable rate and no application or settlement fees for a limited time.
3.97%
4.02%
$445
$0 p.a.
90%
Get a competitive rate without features you may not use.
3.99%
4.02%
$395
$0 p.a.
80%
A flexible low-rate variable home loan that lets you combine your loan with other financial products.
4.09%
4.11%
$0
$0 p.a.
80%
A low variable rate loan with no application or ongoing fees.
3.97%
3.99%
$0
$0 p.a.
90%
A discounted interest rate home loan with no monthly fees.
3.97%
3.97%
$0
$0 p.a.
80%
A competitive variable rate home loan with no ongoing fees.
3.79%
3.80%
$0
$0 p.a.
80%
A competitive rate with no ongoing monthly fees or application fees.
3.72%
4.19%
$0
$0 p.a.
80%
Enjoy a variable 3 year introductory rate with the Bankwest Equaliser Home Loan.
3.84%
4.83%
$0
$0 p.a.
95%
Get a competitive 2-year fixed rate with no application or ongoing fees.
3.69%
4.00%
$0
$350 p.a.
95%
Fix your rate for 3 years and borrow up to 95% LVR.
3.64%
3.64%
$0
$0 p.a.
70%
A basic low-rate home loan that still offers some useful features.
3.69%
4.45%
$0
$375 p.a.
90%
Discount off an already competitive 2 year fixed rate for loans over $150k. NSW,QLD and ACT residents only.
4.09%
4.25%
$300
$10 monthly ($120 p.a.)
80%
Get a competitive investment home loan rate without expensive features you may not need.
3.99%
4.77%
$0
$0 p.a.
95%
A competitive 3 year fixed rate with a redraw facility and split loan options, plus no application fee.
3.99%
4.02%
$600
$0 p.a.
90%
Take advantage of a 0.60% discount on your rate, a 100% offset account and no ongoing fees.
3.69%
3.69%
$0
$0 p.a.
70%
Enjoy a low variable rate with no application and ongoing fees.
3.88%
4.88%
$0
$395 p.a.
95%
Lock in a discounted fixed rate with a low service fee.
4.33%
4.33%
$363
$0 p.a.
70%
A variable home loan with $0 annual or monthly fees.
4.03%
4.07%
$0
$0 p.a.
95%
Enjoy a basic home loan with a high LVR and no application or ongoing fees.
3.85%
4.95%
$0
$395 p.a.
95%
A discounted package rate for owner occupiers with the ability to package a Qantas rewards earning Amplify credit card. $1,500 cashback available for refinancers. Conditions apply.
3.99%
4.99%
$0
$395 p.a.
95%
A package home loan with fee free extra repayments available during the fixed term.
4.39%
5.42%
$300
$10 monthly ($120 p.a.)
95%
Borrow up to and fix in a 3 year home loan rate. Access your account via internet and phone banking.
3.69%
4.03%
$0
$299 p.a.
80%
Enjoy a low variable rate with no application fee.
3.88%
4.47%
$0
$0 p.a.
95%
This competitive introductory rate is a limited time offer for new owner-occupiers
3.68%
3.69%
$600
$0 p.a.
90%
Get a low variable rate along with some important basic features.
3.78%
3.79%
$0
$0 p.a.
95%
A no frills loan with a competitive rate and a maximum LVR of 95%.

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Frequently asked questions

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.

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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