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 January 23rd, 2018
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Loan purpose
Offset account
Loan type
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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.
3.69%
3.69%
$0
$0 p.a.
90%
A special limited time offer for owner occupiers. An IMB Transaction Account must be opened with this loan.
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.
3.49%
4.47%
$0
$375 p.a.
90%
Discount off an already competitive interest rate for loans over $150k. NSW, QLD and ACT residents only.
3.58%
3.59%
$0
$0 p.a.
80%
A competitive variable rate product with low fees offered by a 100% online lender.
3.58%
3.58%
$0
$0 p.a.
70%
A low interest rate home loan with no application or ongoing fees.
3.62%
3.62%
$0
$0 p.a.
80%
A discounted, competitive variable rate loan with limited fees.
3.65%
3.66%
$0
$0 p.a.
90%
A competitive variable rate home loan with no application fee.
3.64%
3.67%
$0
$0 p.a.
80%
A low rate home loan with no ongoing fees.
3.64%
3.65%
$500
$0 p.a.
95%
A basic home loan with a promotional variable interest rate.
3.64%
3.67%
$0
$0 p.a.
80%
A home loan with a competitive variable rate, limited fees and plenty of flexibility.
3.74%
3.76%
$0
$0 p.a.
90%
A home loan with a special rate for owner occupiers. Free offset account.
3.59%
3.62%
$500
$0 p.a.
95%
A loan that combines a competitive rate with a 100% offset account.
3.74%
3.74%
$0
$0 p.a.
80%
Pay no application fee or ongoing fees with this loan.
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.
3.84%
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.
3.73%
3.73%
$0
$0 p.a.
70%
A special low variable rate for owner occupiers with 100% offset account and no application or ongoing fees.
3.78%
3.78%
$0
$0 p.a.
80%
A basic low-rate home loan that still offers some useful features.
3.79%
4.19%
$0
$395 p.a.
95%
A package loan that offers discounts and a 100% offset account.
4.79%
5.44%
$0
$395 p.a.
90%
Package your 4-year fixed rate investment loan and pay no application fees.
4.09%
4.12%
$0
$0 p.a.
95%
This loan has a high max insured LVR, making it an option for low deposit borrowers.
3.65%
4.19%
$500
$0 p.a.
95%
Get a discounted fixed interest rate for the first 12 months while you settle into your new loan.
3.72%
4.19%
$0
$0 p.a.
80%
Enjoy a variable rate with the Bankwest Equaliser Home Loan.
3.65%
4.84%
$0
$395 p.a.
90%
A 2 years fixed platinum package that has $0 application and a loan redraw facility.
4.09%
4.11%
$0
$0 p.a.
90%
Access a fee-free offset account and a special interest rate for investors.
3.99%
4.02%
$0
$0 p.a.
80%
An investment loan with a competitive interest rate and no ongoing fees.
4.14%
4.14%
$0
$0 p.a.
80%
An investment home loan with competitive rate and 100% offset account.
3.74%
3.74%
$0
$0 p.a.
90%
A competitive variable rate with a redraw facility. NSW, QLD and ACT residents only.
3.64%
4.03%
$0
$395 p.a.
80%
Apply for a new owner occupier loan or refinance from another lender and receive this discounted rate.
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.
3.74%
4.15%
$0
$395 p.a.
80%
Enjoy a discount of a competitive interest rate and 100% offset account.
4.39%
4.42%
$0
$0 p.a.
80%
An interest-only loan for investors. Access equity to further your investment opportunities.
4.19%
4.59%
$0
$395 p.a.
90%
Enjoy all the benefits of a full-featured package investment loan, including a 100% offset account.
3.94%
4.88%
$0
$0 p.a.
90%
Enjoy a low interest rate and borrow up to 90% (with LMI) of your property's value.
3.58%
3.59%
$0
$0 p.a.
80%
A competitive variable rate product with low fees offered by a 100% online lender.
3.85%
4.18%
$500
$0 p.a.
95%
Apply for Easy Street fixed rate home loans and get a competitive loan with a fixed interest rate.
3.97%
4.02%
$445
$0 p.a.
90%
Get a competitive rate without features you may not use.
3.99%
3.99%
$395
$0 p.a.
80%
A flexible low-rate variable home loan that lets you combine your loan with other financial products.
3.97%
3.97%
$0
$0 p.a.
90%
A competitive variable rate home loan with no ongoing fees.
$0
$0 p.a.
80%
A low-fee variable rate investor loan with a fast online application process.
3.88%
3.81%
$0
$0 p.a.
95%
A competitive 3-year fixed rate loan with a high max insured LVR.
4.09%
4.11%
$0
$0 p.a.
80%
A low variable rate loan with no application or ongoing fees.
3.74%
3.74%
$0
$0 p.a.
95%
A low rate home loan with no application or ongoing fees. Loan comes with 1 year of free home and contents insurance. Note that to be eligible for this loan you must be QLD resident.
4.34%
4.87%
$0
$0 p.a.
80%
Lock in a low 2-year fixed rate with this interest-only investment loan.
3.84%
4.83%
$0
$0 p.a.
80%
Get a competitive 2-year fixed rate with no application or ongoing fees.
4.11%
4.01%
$0
$0 p.a.
80%
Enjoy a fast application process and flexible repayment options with this fixed rate investment loan.
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.
3.99%
4.77%
$0
$0 p.a.
80%
A competitive 3 year fixed rate with a redraw facility and split loan options, plus no application fee.
3.68%
3.69%
$0
$0 p.a.
95%
A no frills loan with a competitive rate and a maximum LVR of 95%.
3.64%
3.78%
$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).
3.69%
3.71%
$0
$0 p.a.
90%
A discounted interest rate home loan with no monthly fees.
3.87%
3.87%
$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.
3.79%
3.80%
$0
$0 p.a.
80%
A competitive rate with no ongoing monthly fees or application 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.
3.99%
4.03%
$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.
5.29%
5.64%
$995
$15 monthly ($180 p.a.)
65%
Available for former bad credit borrowers who have had a clean credit file for the last 24 months. Loan can be used to purchase a property or refinance.
3.59%
4.42%
$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.
5.59%
5.94%
$995
$15 monthly ($180 p.a.)
55%
Available for borrowers with bad credit history. Can be used for purchase or refinance even with negative listings on your credit file.

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Shirley Liu

Shirley Liu is a program manager at finder, formerly the publisher for Banking and Investments. She is passionate about helping people make an informed decision, save money and find the best deal for their needs.

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