Things to consider
The deposit affects how much you need to borrow from the lender. When your deposit is less than 20%, the lender takes insurance to protect itself. This is called Lenders Mortgage Insurance which can be up to 4% and is charged to you, the borrower. In some cases, either part or all of the premium can be capitalised onto your mortgage.
So the minimum we need is 5% genuine savings for a deposit and 4% in non-genuine savings for costs giving us a minimum of 9% of the purchase price.
A limited guarantee limits the risk for the guarantor.
Having a guarantor helps minimise this risk of your mortgage which can provide several advantages:
- Avoid Lenders Mortgage Insurance which can be up to 4% which is $20,000 on a $500,000 purchase price.
- Remove the need for genuine savings.
- Occasionally qualify for a better interest rate or deal.
- Allow you to use your savings to clear existing debts providing a cleaner, safer start to your mortgage.
First Home Benefits
- The First Home – New Home allows for a waiver of stamp/transfer duty when you build a brand new house. The limit is $550,000 so this represents a waiver of up to $20,240! There is a partial waiver up to $650,000.
- The First Home Owners Grant is a $15,000 payment for eligible first home buyers who purchase or build a brand new home for less than $750,000.
When considering a mortgage there are many affordability considerations about your future that are quite often ignored. They are crucial to your ongoing lifestyle or at worst, keeping your home.
It is important to consider affordability from your perspective as well as the lenders. All because a lender says you can afford a mortgage doesn’t mean you actually can.
Affordability forms part of the lenders decision making process around how much you can borrow when reviewing your application.