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St.George cuts lenders mortgage insurance to $1 for first home buyers with 15% deposits


A couple signing papers.

Skipping on LMI can save first home buyers up to $10,000. Here's everything you need to know.

From today, St.George is giving first home buyers a break by dropping lenders mortgage insurance (LMI) costs to $1 if they're borrowing 85% of their property's value.

In other words, first home buyers can save just a 15% deposit and avoid LMI costs. Borrowers usually need a 20% deposit in order to avoid the extra cost of LMI.

This move is similar to the federal government's First Home Loan Deposit Scheme, which guarantees part of a borrower's deposit, allowing them to avoid LMI while saving only a 5% deposit.

St.George's scheme, while not quite as generous (you still need a 15% deposit), still saves buyers potentially thousands of dollars in LMI premiums.

Of course, there are a few conditions to the offer:

  • You need to apply for an owner-occupier loan with principal-and-interest repayments.
  • The maximum amount you can borrow is $850,000. With a 15% deposit, this equates to a $1 million property value (this is much higher than the limits in the First Home Loan Deposit Scheme).

To get a clear picture of how much this offer can save you, let's look at some examples. In the table below, we've looked at some property values with 15% deposits and put them through Genworth's LMI premium calculator to estimate the LMI costs.

First home buyers can essentially save the entire estimate in the final column (minus a single dollar).

Loan amount15% depositLMI cost

Figures in the table above are estimates only using a 30-year loan term.

St.George General Manager Ross Miller said, "Our research shows one of the biggest hurdles for first home buyers to overcome is the time it takes to save for a deposit, despite being in the financial position to make home loan repayments. By reducing the expense of Lenders Mortgage Insurance, first time purchasers may be able to afford a property that meets their needs sooner and save thousands of dollars."

This matches research last week by ING, which found that 42% of Australians cite deposit costs as the biggest barrier to home ownership, making it the biggest barrier by far (fear of long-term debt was second at 25%).

It's a confusing time for first home buyers right now. Interest rates have never been lower, which is a huge benefit for borrowers because it makes home loan repayments cheaper, and property prices, having recovered from the 2017-18 slump, are sliding slightly off the back of COVID-19.

But the pandemic is a whole problem in itself, with unemployment rising and physical restrictions on property sales only recently lifted (and in Melbourne, recently re-imposed).

Any extra help for first home buyers in these circumstances is very welcome.

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