So … you’ve decided to settle in Wollongong. Great choice! The next step is to buy THAT house. It isn’t as easy as it used to be but there are several things to get you started, like getting a home loan which will only require you to have a deposit (or sometimes none!) to move forward.
How much do I need for a house deposit?
Getting a home loan requires you to pay a specific portion of the property price in cash -- that is your house deposit. Your deposit varies depending on the house you’d like to purchase and the home loan will cover the rest of the property price.
If you pay 5-20% of the property price, you may likely need to pay for additional costs, compared to when you pay a larger percentage house deposit.
Advantages of a bigger deposit
A bigger deposit will give your lender an impression that you are capable of paying your home loan. This will heighten the chance of your home loan application approval.
A bigger deposit means paying less interest. This will also give you the chance to finish off your loan sooner.
On the other hand, a 5-20% deposit is accompanied by additional costs such as the Lenders Mortgage Insurance.
Low deposit home loan
Let’s be more realistic, a 20% house deposit is still a bit of a challenge, especially for those who have other bills to pay, and groceries to buy. In an instance where the property value is at $500,000, you’ll be needing to pay a cash deposit of $100,000.
Some lenders can be considerate to let you borrow up to 95% of the property’s value. In this case, a $500,000 house can be yours for a deposit of $25,000 -- a much feasible amount. Through the Lenders Mortgage Insurance (LMI), a 5-20% deposit is possible, but still, the risk of a smaller deposit should be expected.
Lenders Mortgage Insurance
The Lenders Mortgage Insurance (LMI) covers the lender and not the person who is getting the home loan. LMI is paid to the bank’s insurer to cover the bank in case you are unable to pay for your home loan. You can pay your LMI as an upfront cost or, depending on how much LMI you have to pay, you can add it to your home loan amount.
An LMI is required if your home loan deposit does not reach 20% of the house’s or property’s “lender-assessed value”. The lender-assessed value is how much the lender values the property you want to purchase, or what is known as its “market value”. The remaining 80% the lender pays for you is called the ‘Loan-to-Value Ratio’ (LVR). The higher your LVR, the higher the risk to the lender, this is also the reason why an LMI is required for house deposits less than 20%.
No deposit home loan
Yes, you can still have your dream home at Wollongong even if you don’t have the cash deposit with the help of a family member who can act as a guarantor on the loan. Given that the family member is an immediate adult family member and agreed to put the equity of his or her property as a security for the property you’d want to purchase. This is a substitute for the cash deposit.
You can pay the home loan as normal after this. The good news is that after paying off part of the loan or after your property has increased in value, you can apply for the removal of your family member in the default payment liability of the no deposit home loan.
Other costs of buying a home
Aside from the deposit, there are other upfront payments you need to make. Things such as stamp duty, home insurance, pest and building inspections, and your moving expenses.
Buying a house in Wollongong
Buying a property in Wollongong is so much easier when you consult with a licensed real estate agent like Anthony Sorace. Discuss your preferences with people who know the place and the processes and move to your dream house the soonest! Contact a real estate agent from A-List now.