The task of buying your first home can be an extremely daunting prospect. It is hard enough trying to save for your deposit when you’re already paying rent and other bills. To help ease the strain of your first home loan purchase it is imperative to do your homework and aim to find on of the best possible home loans at an affordable price.
First home buyer loans are offered to help prospective first home buyers to enter the property market sooner. There are a number of premium first home buyer loans available offering low variable interest rates. These loans often appeal to anyone who qualifies for the First Home Owners Grant. The grant varies by state, but is a halpful leg up into the property market, particularly in capital cities which have seen major price growth and affordability issues over the past decade or so.
Many first home buyers also get some loving assitance from parents or relations. This can come in different forms, such as a gifting of some or all of the deposit, or offering to sign up as a guarantor on the loan. A bigger deposit by way of a gift, or a guarantor signing up as support can mean a first home buyer can avoid the dreaded extra expense of Lenders Mortgage Insurance, otherwise known as LMI.
LMI is often mistaken as insurance to protect the borrower. This could not be further from the truth. LMI proectes the lender from borrower defaults, the borrower certainly does not get scott free. In the worst case scenario that you cannot afford to pay your home loan and go into serious default, the house may be sold by the lender to recoup the money owed. If there is a gap between what is owed and what the house is sold for, LMI fills the gap for the lenders benefit.
One of the most reliable ways to avoid the cost of LMI in the first place, and reduce the chance of default in future, is dedication to a regular savings plan in the lead up to your first home purchase. By proving to yourself and the lender that you can afford the and stick to a budget for long enough to save a big deposit, you will be far better placed to take the leap into home ownership. And after all, a bit of delayed gratification never hurt anyone!
To secure your dream home today, compare mortgages, crunch the numbers using our home loans calculator and follow our news articles to get the latest home loan tips. For more information visit our detailed home loans guide.