First home buyers struggling to scrimp and save for a 20% deposit to avoid lenders mortgage insurance (LMI) are being offered a possible way to buy a new home sooner.
Non-bank lender Resi Mortgage Corporation (a subsidiary of the Yellow Brick Road Group) is offering homebuyers the flexibility of paying LMI with a monthly premium solution on their Resi Essential Options Home Loan.
Resi Mortgage Corporation says the benefit of this for homebuyers is that the monthly premium LMI does not impact the loan-to-value ratio (LVR), meaning buyers might be able to borrow up to 95% of the market value of the property.
The latest Helia First Home Buyer Report 2022 found the length of time needed to save a 20% deposit for a medium home in Sydney is 17 years and 10 years for Melbourne. As a result, the number of first home buyers aiming for a 20% deposit has fallen to approximately 25%, compared to 41% in 2019, said Helia.
“We want to help more Australians achieve their dream of homeownership,” said Yellow Brick Road executive chairman Mark Bouris (pictured above left). “It’s no secret that the biggest challenge for most first home buyers is saving for a 20% deposit, not whether they can afford the home loan repayments.
“So, we partnered with Helia, our LMI provider, to offer our customers who are buying their first home the flexibility to pay for LMI monthly. Because the monthly LMI fee doesn’t affect your LVR, a greater portion of your loan can be used to buy your home, which means it might make the difference between buying your home now instead of in another year or two.”
The Resi Mortgage Corporation LMI offer is part of a trend when it comes to easing the cost of LMI for borrowers. In September, Westpac announced it was expanding its LMI waiver for health professions that qualified for an LMI exemption, allowing eligible registered nurses and midwives with a 10% deposit to avoid paying LMI if they earned over $90,000 per year.
Helia chief commercial officer LMI Greg McAweeney (pictured above right) said Helia was excited to partner with Resi to launch its monthly premium LMI offering to the market.
“LMI plays a critical role in supporting Australians to accelerate their financial security through home ownership,” McAweeney said. “We are proud to bring innovation, flexibility and the choice to pay monthly to people wanting to buy a home with our monthly premium LMI solution.”
McAweeney said another benefit of monthly premium LMI was it might be a more flexible and cost-effective solution rather than the traditional upfront LMI if you paid down your loan sooner.
“Let’s say for example you receive a bonus or an inheritance that you use to pay down your mortgage and reach the 75% LVR quicker than you expected,” he said. “Unlike if your LMI fee is capitalised into your loan, you’ll be able to stop paying the premiums and potentially save money.”
In February, Yellow Brick Road announced it was partnering with NAB subsidiary Advantedge Financial Services – a subsidiary wholly owned by NAB to expand its product range and deliver competitive variable rates to its customers from under 2%, a partnership welcomed by Bouris.
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