Low Deposit Home Loans and no LMI Home Loans
Low-deposit home loans allow you to purchase a property with a smaller equity or cash contribution, potentially as little as 2-5% of the property value. “No LMI” home loans enable you to borrow more than 80% of the property’s value without paying lenders mortgage insurance, offering first home buyers and investors an opportunity to enter the Perth property market sooner while minimising upfront costs.
Brodie Brown
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Meet Brodie Brown
If you’re exploring low-deposit home loans or ways to avoid lenders mortgage insurance, I can help you navigate your options. I’m Brodie Brown, Managing Broker here at BH Brown Mortgage Brokers. Based in Perth, we specialise in home loans for a range of different situations and work with clients right across Perth’s Western Suburbs.
Brodie Brown
The Property Investor’s Mortgage Broker
Understanding Low-Deposit Home Loans in Perth
“Low deposit” means exactly that. You buy a home or property with a small equity or cash contribution.
Depending on a range of factors I won’t go into here, this could be as little as 2%. We do not offer, nor recommend any loans that permit a lower deposit. We like to see 5% plus deposit, it shows to us you’re ready and can handle a financial commitment.
Low deposit lenders are an excellent way for first home buyers to start on the property ladder way sooner rather than spending years trying to save for a deposit. Remember, the lender is taking a greater risk than a typical customer borrowing less than 80% so you’ve got to have your shit together and organised.
Benefits of No LMI Home Loans
To get a mortgage with a loan-to-value ratio (LVR) of more than 80% without lenders mortgage insurance, you’ve got fairly limited options, but at the time of writing there are some pretty bloody good options available up to 85% that non-major lenders offer.
Why would you want to get a home loan and borrow more than 80% of the value of the property and avoid paying LMI, and what’s the catch?
LMI is best avoided. You’re paying to insure the lender for the apparent increased risk of the transaction. It’s a cost that’s added to the purchase cost of the property and ends up being added to the cost of borrowing or, as we might say, ‘capitalised’. The premium might be as low as a couple of thousand or more than $20,000 – it depends on a number of factors, mainly the total amount borrowed and the LVR which spits out a risk-based fee.
How No LMI Loans Work and Save You Money
If you can avoid paying this at the beginning, if you meet the criteria and the deal suits the lender, the worst that’s going to happen is you will be faced with a slightly higher interest rate. Usually in the vicinity of 0.25% or similar.
This is cool, because while you might be paying more interest in the short term, as you repay the loan, and the value of the property increases, the LVR decreases. Once the LVR is less than 80%, you’re in a position to negotiate with the lender or another lender for more favourable terms and lower interest rate without having coughed up to insure the bank. You need your money more than they need yours, trust me on this.
The lender will cover the premium on the borrower’s behalf, usually folded into a higher than average interest rate.
Getting Started with Your Low-Deposit Home Loan
The game, in the end, is to minimise the total cost of borrowing. We get nerdy about this type of thing and have done hundreds of these types of home loans with the small handful of lenders that offer this creative solution (but – they come and go!) so if you’re almost at a 20% deposit plus the costs like stamp duty, etc, but you want to get into a property now, and avoid lenders mortgage insurance, send an enquiry with details here.
Before you reach out to us, make sure you have:
- A perfect credit report with no blemishes
- A decent credit score
- No missed payments
- Very little other debt
If you aren’t organised, go get yourself together and come back when you are. We’re here to help.
Important Considerations for Low-Deposit and No LMI Home Loans
The Trade-Off:
No LMI loans typically come with a slightly higher interest rate (usually around 0.25% or similar) instead of the upfront LMI premium. This means:
- You pay more interest in the short term
- You avoid capitalising a large LMI premium
- As you repay the loan and property values increase, your LVR decreases
- Once LVR drops below 80%, you can refinance to better terms
The Goal:
Minimise the total cost of borrowing over the life of the loan. We specialise in structuring these types of home loans and have completed hundreds of them with the select lenders offering this solution.
Getting Started:
If you’re close to a 20% deposit plus costs like stamp duty, but want to get into a property now and avoid lenders mortgage insurance, we can help you navigate your options with Perth mortgage brokers who understand the local market.
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Brodie Brown
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