Why Lenders Mortgage Insurance Might Actually Be Your Friend

Gone are the days when saving up a hefty 20% deposit plus additional costs was the only route to owning a home. Thanks to lenders mortgage insurance (LMI), aspiring homeowners can now take a step towards their dream with a smaller deposit. While some view LMI with scepticism, considering it a financial burden, it can actually be a valuable ally, especially in today’s Australian housing market where soaring prices pose significant challenges for first-time buyers.

The Reality of the Housing Market

The housing landscape has dramatically shifted over the years. In 1970, the average house price in Sydney was 4.5 times the average household income. Fast forward to today, and that figure has skyrocketed to a staggering 12 times. With such exponential growth in property prices, the dream of homeownership seems increasingly out of reach for many.

Why Consider Lenders Mortgage Insurance

Let’s delve into the numbers with a practical example. The median house price in Australia now stands at $933,800. Opting to avoid LMI and aiming for an 80% loan-to-value ratio (LVR) would require a hefty deposit of $220,040. However, embracing LMI with a 95% LVR significantly reduces the deposit to $112,072. That’s a substantial difference of $107,968! While one could continue saving to bypass LMI, the question arises: how long would it take to accumulate an additional $107,000? Meanwhile, property prices continue to surge, with an annual increase of 6.3%. Within just 12 months, that $933,800 property could escalate to $992,629, resulting in total purchase costs of $1,028,803 and a new deposit requirement of $234,700.

In Conclusion

For those fortunate enough to receive parental assistance, the path to homeownership may seem clearer. However, for individuals navigating the journey solo, it’s worth considering the benefits of lenders mortgage insurance as a means to realise the dream of homeownership sooner rather than later.

To find out more or if you would like to investigate the possibilities of owning your own home, contact Deon Booyson from Lendi Home Loans at deon.booyson@lendi.com.au or call 0478 612 558.