5 smart ways for investors and rentvestors to maximise LMI
LMI opens up opportunities for property investors and rentvestors.
Sponsored by Helia. As a leading provider of Lenders Mortgage Insurance (LMI), Helia makes it easier and faster for home buyers to purchase property. T&Cs apply.
Lenders mortgage insurance (LMI) lets eligible property buyers purchase property even when their deposit is less than 20%.
LMI isn't just a way to fast track your next purchase. It's a powerful strategy for investors to expand their property portfolios.
1. Rentvestors: live where you want, invest where it counts
Rentvesting means you rent in a suburb where you love while investing where you can afford and your money works smarter.
Normally, saving a 20% deposit for that investment property would take years.
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Find out how LMI can help you get started with a deposit as little as 5% plus additional upfront costs such as stamp duty (subject to satisfying your lender's eligibility criteria). For more information, go to helia.com.au/letsmeinvest
With LMI, you can get in sooner with a smaller deposit. Plus, it can provide you with more options.
Instead of a smaller property, you could use LMI to buy an investment that may be more profitable.
Sharona, for example, used LMI to buy an investment property that included a freestanding house with a granny flat, in a high-growth area.
Sharona decided that rentvesting was the right decision after weighing up the benefits and risks.
You can read more in Sharona's case study.
Helia's Home Deposit Estimator makes it easy to test different deposit sizes and purchase scenarios.
2. Investors: keep savings liquid and grow your portfolio faster
For more seasoned investors, cashflow is important.
Even if you could put down a 20% deposit, you may feel that this money could be put to better use somewhere else.
That's where LMI comes in handy.
LMI may let you hold back some of that cash. You may decide to keep this cash invested elsewhere or simply on hand for another investment opportunity.
By using LMI, you're not tying up all your capital in one property.
3. Rentvestors: enter the market sooner without giving up lifestyle
A big appeal of rentvesting is that you don't have to compromise.
You can rent in a suburb you love, enjoy the lifestyle you want, and still invest in property where it is more affordable.
The tricky part is saving up for a deposit while you are paying rent.
That's where LMI can help. Instead of waiting years to save 20%, you can buy sooner with a smaller deposit.
This means less time saving and more time building equity and earning income from your investment.
So, you keep the lifestyle you want, while your tenant helps you pay off your property.
Couple sitting with a lending specialist. Image: Supplied
4. Investors: diversify sooner with multiple properties
For the right investor, LMI is a strategy that can help you expand your portfolio.
You may be able to afford an additional investment property with your existing cash or assets.
If you can afford the repayments (including additional costs associated with an investment property) but the deposit requirements are holding you back, LMI may let you stretch further and purchase multiple properties.
LMI could let you split your savings into two smaller deposits of, say, 10%. And you could then purchase one property followed by another.
That means two rental incomes, two opportunities for capital growth, and a bigger portfolio sooner.
Property investing is, after all, a question of managing loans and finance as much as it is about houses and tenants.
Keep in mind that this is a sophisticated strategy. This requires advice and planning from your experts, such as a financial and legal adviser, an accountant and a tax specialist.
Woman sitting on bed at home reading about Lenders Mortgage Insurance. Image: Supplied
5. Both rentvestors and investors: Stay flexible and seize market opportunities
LMI is about having more options.
Instead of spending years saving for a 20% deposit and restricting your options, LMI can open up different pathways.
You may be able to buy sooner, expand your property search or even consider purchasing a higher-valued property with a smaller deposit.
It's about flexibility so you don't miss opportunities while waiting. Here's a simple example:
- A 20% deposit for an $800,000 property = $160,000.
- A 10% deposit on a $1,000,000 property = $100,000.
That's a $60,000 difference.
In other words, LMI could open the door to buying a bigger property earlier (not including the cost of the LMI fee). The LMI fee typically charged is between 1% and 2% of the loan value, depending on the size of your deposit and how much you borrow.
In a rising market, LMI can be the difference between getting in or being left behind.
You can use Helia's Home Deposit Estimator to compare options based on your circumstances. You can also calculate projected LMI costs with Helia's LMI fee estimator
Learn more about LMI with Helia
Sponsored by Helia. As a leading provider of Lenders Mortgage Insurance (LMI), Helia makes it easier and faster for home buyers to purchase property. T&Cs apply.
Disclaimer
Lenders mortgage insurance (LMI) is insurance that protects lender/credit providers, not home buyers, and cannot be provided directly to home buyers. Eligibility criteria, terms, and conditions apply.
The information contained in this article is general information. It does not constitute legal, tax, credit or financial advice, and is not tailored to a home buyers' specific circumstances. Home buyers should consider their own personal circumstances and seek advice from their professional advisers before making any decisions that may impact their financial position. Any references to reports or data are provided for general information only and may not apply to your circumstances.
Helia Insurance Pty Limited's ('Helia') does not provide or engage in credit activities as a credit provider, except for limited credit activities engaged by it as an assignee in relation to providing LMI products or as a credit provider under the doctrine of subrogation in relation to providing LMI products. The information provided in this article does not refer to a credit contract with any particular credit provider.
Image: Supplied: Helia