Hi everyone.
Looking to buy our first house in Brisbane (around Alderley) but we haven't been able to save the 20% deposit.
I'd like to know what OzBargain thinks of the 5% deposit scheme without LMI from the government, or any other low deposit loans.
We have about $25k in savings, looking to buy an apartment / townhouse for $500k
Currently paying $450 per week rent, we would rather pay more for a mortgage.
Happy to speak to brokers as well, we're looking at applying in Sept / Oct
I agree.
I called my bank the other and they gave me some quick numbers but basically, with all the fees and the LMI my $25k deposit would need to be $48k deposit… for 5%
Not sure if I was given the right advice but why would you charge me $15k of LMI if I haven't been able to save the full amount?
Just whack it on top of the loan and let me pay it off in the long run.
We've been renting for too long and our current rent would comfortably service a small loan.
with all the fees and the LMI my $25k deposit would need to be $48k deposit… for 5%
Ah yes, didn't include stamp duty and other government related fees to it, those are a massive killer.
Not sure if I was given the right advice but why would you charge me $15k of LMI if I haven't been able to save the full amount?
Same reason they give you a higher rate (charging you more for a loan), when you're a riskier client
We've been renting for too long and our current rent would comfortably service a small loan.
Honestly don't blame you mate, sometimes its worth considering your circumstances to see what's best in the long run. Best thing about a loan is that one day you'll own the house, and you won't have to pay any rent ;)
I called my bank the other and they gave me some quick numbers but basically, with all the fees and the LMI my $25k deposit would need to be $48k deposit… for 5%
Comm bank?
It depends on the bank, but many won't speak to you if you don't have around $50K deposit, you won't even make it past the teller. Infact many brokers won't speak to you as well if you tell them you only have $25K deposit (I've been told its because they make less money from you).
Other banks will be more receptive though, I've found NAB and BeyondBank for me. They usually calculate with the LMI on top as opposed to calculating with the LMI (that I've seen commbank do).
But you'll need to find a bank or broker thats willing to do the extra effort as you have a lower deposit. You may also want to look at alternatives (like having family be a gurantor or parents house to gurantor or the like).
My family lives and owns O/S and my in laws aren't too keen on being guarantors.
And I can't be effed begging them tbh
Other than the fact that there are limited spots for the government's first home loan deposit scheme, I think it's great.
I'm pretty sure that scheme is very hard to get into.
I'm pretty sure it's 10,000 spots Australia wide. And I have heard rumours it's mostly given to NSW/Victoria. But I can't find any evidence.
Also under that scheme for first home buyers, I think you are limited to the amount you can spend on the home. It does vary state to state though. So many factors you need to look into…best to speak to a broker who will know more.
Maximum for QLD is $475,000 for an existing house and $650,000 if you build (I think)
I read somewhere that the government had added more spots on the scheme due to the current crisis. (I could be wrong)
Just FYI, last year those 10,000 spots were gone within 6 weeks. First in, first served. So if you want in, it's best not to wait too long…
I remember I borrowed $450,000 about 3 years ago with 5% deposit. My LMI was about 15K, but it was just added to the loan and helped us get in the market when we never really could have.
I feel that in 3 years that 15k was saved in rent costs so I can live with it..
In the end, if a bank was OK to put the LMI on top of the amount borrowed, I'd be willing to talk, but the bank I spoke to was basically charging it upfront.
$25k deposit became $25k + $15k LMI + other fees = almost $50k!
WTF?
@Nuclearvodka: That makes no sense. I would probably get a broker (if its your first time).
Just be aware too that home loans are in high demand. And with COV-ID too, approval times are very slow. It took me 7 weeks just to get a variable loan moved to fixed rate!
Best to do research and get a broker who can explain things well…it will save you a lot of time and headaches.
@Nuclearvodka: Don't forget if they're only able to lend up to 95% it's not really possible just to "add it on top". Maybe work the other way and it might make more sense. Eg:
$500k house + $15k LMI + ~$10k other fees = $525k total for the transaction
Bank can provide 95% of $500k = $475k. ~$50k is the shortfall to cover the rest.
You would look at your cashflow, and whether you could service the loan repayment plus strata plus council fees plus ongoing repair plus utilities normally covered by rent (e.g water and sewage)
You would also look at the impact to your cash flow if the interest rate rises over the term of your mortgage. Very likely to happen for 30 years loan.
If there is no financial pressure, it is a good scheme
At the moment, we would be pretty much paying the exact same as what we pay in rent.
But yeah, if the interest rates were to jump too high it could be a problem, but that would be for everyone.
So I’d put $100pw aside for those ownership related cost. Which means you have $350pw left to service your mortgage. This means you need to get an equivalent of a 475k loan with less than 1% interest rate over 30 years. For a 2% loan you need $405pw. Here I am assume fee free loans
Is this what you meant by paying exact same? If you just think the $450pw can all go into the mortgage I ask you to think twine.
Note here I haven’t even ask for your income and expenses to talk about borrowing capacity. If you have heaps of income that can service the mortgage, this scheme is great to get foot in door
Don't forget home insurance. That's another $1000+ a year
Not sure about "heaps of income"
We're both on $70k & $75k a year.
1 dependant (6 years old)
1 credit card and 1 car loan (car loan has $7k left on it and crazy low interest).
We have been paying rent around $500pw for the past 12 years.
Travelling a lot and paid a fortune for IVF. So there goes the house deposit.
We're also both salary sacrificing into our super.
but we could easily afford a $500k mortgage. we just don't have the deposit
@Nuclearvodka: What I’m highlighting is there is more than just the mortgage you worry about with home ownership.
You are not looking at the complete picture if you think oh, I’ve been paying $450pw rent, I can afford a 30 year mortgage at the same repayment amount with current interest rates. Need to have that cashflow to deal with other bills. That holds the key to your answer on whether 5% deposit is a good idea for you
You might make profits in the future if you decide to sell and what not, but until you sell, you need to service the whole ownership cost
@avoidfullprice: I really appreciate what you're trying to say.
I feel like 2 professionals with only 1 dependant and no debts, we should be able to borrow $500k-$600k and comfortably service the mortgage.
I mean banks have been "offering" us to borrow up to $900k which is crazy.
@Nuclearvodka: You also need to look at it from the banks view.
2 professionals combined +140k income, no debt and 1 dependant and only a 25k deposit. They’re looking at your cash flow and ability to pay and maintain financial commitments, even taking into account your rent payments towards the loan.
The 25k covers costs on a 500k home leaving no ‘deposit’ as per https://www.ozbargain.com.au/comment/10770737/redir
They would take on 100% risk. Banks aren't going to do that.
A basic rule of thumb is banks will lend 6-7 times your income IF you have a decent deposit ~10%. If you have less your LMI goes up and you will have less choices for loan provider if they will consider it all.
See a broker. Our broker helped up get into the market with a low deposit, and it was the best thing we ever did. If you want his details send me a pm.
LMI is such a waste of money, what are the benefits of you getting the 95% LVR loan from a bank, rather then the government?