This question is one of the most difficult to work out sometimes, especially when you have some real estate agents, online calculators and property advertising that you can secure a home for just $1,000 or 5%…
I’m going to try and put it in perspective, there are just so many variables…
The general rule of thumb is 10% of purchase price up to about $500k will get you in with a high Loan to Value Ratio (LVR). This would mean that Lenders Mortgage Insurance (LMI) is payable and at this level it could amount to around $14k.
LMI is payable on all loans, usually at any level above 80% loan to value ratio (LVR). This is how nearly all banks lend. Some banks have exceptions around this and some will waive the LMI. If you are a medical professional/solicitor/accountant etc with some banks you can get a waiver under 90% LVR or some banks will waive LMI completely for everyone under 85% LVR. Mortgage insurance covers you for NOTHING, you are paying the banks insurance if you can no longer pay and they have to call in the debt. Sometimes though it’s an opportunity cost in order to get into the market but I will address this in another post.
Banks work out the loan to value ratio based on the purchase price of the house + stamp duty + legals + transfers and registrations of mortgages basically any and all costs associated with the purchase including the addition of mortgage insurance so doing it alone can be fraught with difficulty.
In order to have most banks available to you, 5% genuine savings is a must, this is 5% of the purchase price. What this means is that you have been saving for between 3 – 6 months into an account that has been contributed to and money held over this time. I’ll discuss genuine savings in another post as there are quite a few variables here too.
The first home buyers grant helps to change the figures a little, with stamp duty concessions in some states and other monetary grants from the government. Though only having the 5% and contributing the grant to the loan sometimes still isn’t enough.
The stamp duty concession varies between all the states and territories as does the first home buyers grant and so the science of working out how much you really need becomes muddy.
The easiest way to work this out exactly is to speak with me or find a broker, as occasionally I have found that some clients who spoke directly to their banks ended up with a bum steer on what they needed.
Call me to have a chat about what we need to do to help you into a home and how much you really need.
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