27/04/2021
Big news!
Purchase with a 5% deposit !
First home buyers who are struggling to save enough for a 20% deposit can now potentially get into a home sooner with the flexibility to pay Lenders Mortgage Insurance (LMI) with a monthly premium solution launched today by Gateway Bank, the first Australian bank to do so.
Gateway Bank is offering borrowers an option to pay the cost of LMI by the month. A key benefit to the borrower is that Monthly Premium LMI doesn’t impact the loan-to-value ratio (LVR), which means you may be able to borrow up to 95% of the market value of the property.
Another key advantage is that, unlike traditional methods of paying the bank an upfront fee for LMI, once the LVR on the property drops below 80% the monthly premium payments will stop.
LMI is generally required by all lenders if home buyers have less than a 20% deposit. It protects the lender (not the borrower) if the borrower fails to make the home loan repayments.
With other lenders, the LMI premium fee must either be capitalised into the home loan and paid off with interest over the life of the loan (the option most chosen); or paid upfront in a lump sum when the loan is taken out.
“We want to help more Australians achieve their dream of home ownership. 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,” says Lexi Airey, CEO of Gateway Bank.
“So, we partnered with Genworth, our LMI provider, to offer our customers who are buying their first home the flexibility to pay for LMI monthly.”
“Because the monthly LMI premium doesn’t affect your LVR, a greater portion of your loan can be used to buy your home,” Ms Airey explained.
“It might make the difference between buying your home now, instead of in another year or two.”
For brokers, Gateway’s monthly LMI premium option provides an opportunity to: attract high quality borrowers seeking to pay down their loans quickly, building equity in their home offer greater options for your borrowers which may increase their flexibility to change their loan arrangement in the future and reduce overall costs simplify premium calculation where an additional loan advance is made with the current policy ceasing and a new policy being issued with a new monthly premium amount.
Genworth Australia CEO & Managing Director, Pauline Blight-Johnston said, “We are excited to partner with Gateway Bank to launch our new Monthly Premium LMI offering to the market. LMI plays a critical role in supporting Australians to achieve financial security through the purchase of homes. We are proud to bring innovation and flexibility to people wanting to buy a home with our Monthly Premium LMI solution”.
Another benefit of Monthly Premium LMI is that it may be a more flexible and cost-effective solution than the traditional upfront LMI if you pay 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 80% LVR quicker than you expected. Unlike if your LMI fee is capitalised into your loan, you’ll be able to stop paying the premiums, and potentially save money.
