Purchase and deposit
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LMI figures are indicative mid-points of the ranges insurers and lenders have charged for the band and loan size, and real premiums vary by lender, insurer, loan purpose and whether the premium is capitalised. Stamp duty here is an estimate for an established home; the stamp duty calculator works it precisely, including first home buyer concessions.
How the premium moves with the deposit
| Deposit | LVR | Loan | Indicative LMI | Monthly repayment |
|---|
Repayments use an example rate of 6.50% over 30 years, principal and interest, with LMI added to the loan where it applies. Not a rate on offer.
The ways LMI is avoided or reduced
- A 20 per cent deposit No premium at or below 80 per cent LVR. Each extra 5 per cent of deposit also drops the premium by a band, so a deposit a little short of a threshold is worth a conversation about timing.
- The 5% Deposit Scheme For eligible first home buyers, the government guarantee removes LMI at 5 per cent deposit, within price caps. The eligibility page checks the caps for your area and the other conditions.
- A guarantor A parent's property used as additional security takes the LVR on the combined security below 80 per cent. The guarantee is usually limited to the shortfall and released once the loan is paid down or the property has grown in value.
- Profession waivers Several lenders waive LMI to 90 per cent, and some to 95 per cent, for doctors, dentists, vets, pharmacists, physiotherapists, accountants, lawyers and some others, usually with income and membership conditions. Policies differ lender to lender and change.
- Lender-paid or discounted premiums Some lenders absorb or discount LMI at 85 per cent for strong applicants; a few price the premium into the rate instead. Both are worth comparing against the one-off figure.
What a lender looks for in the deposit
Genuine savings. At higher LVRs, most lenders want to see at least 5 per cent of the price held or saved over three months. A gift from family counts once it has sat in your account for that period, and rental history is accepted by many lenders in place of savings.
Costs beside the deposit. Stamp duty, legal fees, inspections and lender fees sit on top of the deposit and cannot be borrowed against the property itself. First home buyer concessions reduce the duty in each state; the stamp duty calculator has the thresholds.
LMI is a cost to the borrower, protecting the lender. It does not protect you if repayments fall behind. Added to the loan it is repaid with interest over the term; paid up front it reduces the loan. Both are shown above.
Understanding where the deposit sits against the 80, 85, 90 and 95 per cent lines, and which of the exits applies to you, is what makes the deposit conversation a short one.