When you are looking to invest in property, there are many new things and terms that you are going to have to learn in order to stay ahead of the curve. For example you’re going to have to get yourself a mortgage broker, a financial adviser, a lawyer and an accountant to make sure that your finances are in order every year for your tax. After all, one of the best parts about investing in property in Australia is the fact that as investors you are very well looked after by the Australian government come tax time. It’s advisable that you surround yourself with a great team of people who are on your side and committed to your financial success. After all, your financial success is their financial success, so it needs to be in their best interest that you make as much money as possible – comfortably and safely! Homestart low deposit home loans are an excellent place to start if you’re looking for a great low deposit home loan.
There are some interesting things that you need to learn about getting a home loan, and they have to do with the amount of deposit that you put down on the house. The standard amount that used to be saved was 20% of the house value. Sadly with today’s property prices being what they are, it is often impossible for people to save the money for a deposit for a house. There are ways around this however, and we are going to discuss one of them now: Lender’s Mortgage Insurance. Lenders mortgage insurance refers to the insurance paid by a homebuyer when they put down a deposit of less than 20% on a property.
Lenders mortgage insurance actually allows you to borrow up to 95% of the value of the property with a lower deposit that is usually required. If you happen to be a homeowner already it’s even possible that you can use your own home and the capital growth that has occurred in it as a deposit for your property. So what does this mean? Basically it means that there is actually no cash financial outlay for you as a potential investor. Of course you are still committing financially to the purchase, but all you need to do is speak to your financial team about how to structure your finances. They can help you so that you can continue to pay off your home loan and also pay for your investment property.
When we are talking about lenders mortgage insurance, the person who is actually insured is your lender – not you or your guarantor – and this is because they are the ones who are lending the money! Some people are concerned about the price of lenders mortgage insurance because it can be up to $20,000. When you think about it though, the cost to you for being able to buy a house now as opposed to waiting five years to save a deposit means that the growth that you can earn on a potential investment property might be $20,000 and then some!
So is lenders mortgage insurance worth it, or is it better to save up a deposit equal to 20% of the value of the home the traditional way? Different schools of thought will have different opinions about this obviously, some like to use a more aggressive strategy, and they will obviously endorse using lenders mortgage insurance. Other people are more risk averse and will opt to save the money themselves. What ever you choose to do make sure you read everything carefully and consult a professional!
* This article was prepared specifically for purchasing property in Australia and should be used as reference only and should not be construed as advice. Before purchasing a property, you should seek personal advise from a licensed practitioner to suit your own circumstances.