If you are considering getting into your own home, you have probably been giving some thought about the right time to buy. Getting your own home and taking on the responsibility of a home loan is a big step and one which requires careful planning. Your timing will be affected by the market as well as your reasons for buying, your budget and your savings.
You need to find the right balance of your requirements and what options are available to you.
You have your reasons to get moving
Weighing up the pros and cons of when to buy a home will depend on your personal situation. If you are living with parents, you may be able to take your time. If you are renting, you will need to consider if you would rather be paying a mortgage than paying rent. Perhaps you have a growing family and need more space than your home currently offers.
The amount of deposit required by lenders will vary, dependent on the lender’s loan products, your situation and how much you need to borrow.
Keystart’s low deposit means our customers can get into their own home sooner. With a Keystart home loan deposit starting as low as 2%, it may not take you very long to save the required amount.
In the reverse scenario, waiting to save a larger deposit represents a trade-off in the time spent renting rather than living in your own home, but may open more options in terms of a range of lenders.
The trade off with interest rates
Keystart’s vision is to make the dream of affordable home ownership a reality for more people. Our low deposit home loans can get you into your own home sooner. In order for Keystart to offer low deposit home loans, we have an interest rate policy that enables us to manage our lending risk responsibly.
When researching interest rates with other lenders you may find there is a requirement for a higher deposit (5 or 10%) before you would be eligible for a loan with that lender. It’s important to investigate the loan conditions carefully, as advertised interest rates are only one part of the story.
Lender’s mortgage insurance option
Another option to access a home loan with a low deposit could be to go with a lender who charges lender’s mortgage insurance (LMI). This allows borrowers to access loans with perhaps a 5% or 10% deposit. The LMI protects the lender (not the borrower) but is paid for by the borrower, and can amount to a significant cost. Read more about lender’s mortgage insurance.
Keystart does not charge LMI on our home loans.
Compare: Let’s look at an example
Julia and Tony are a single income family with two children aged 4 and 6 and would like to stop renting. They want a home of their own for their family. Their annual combined income is $110,000. They are looking at a home for around $430,000 purchase price. They have no other debts and minimum household expenses.
Saving for Keystart’s 2% deposit
Saving for a 10% deposit with another lender
|Annual income before tax||$110,000||$110,000|
|Annual income after tax||$79,603||$79,603|
|Keystart minimum benchmark living expenses for a family with two children*
||$3,872 per month||$3,872 per month|
|Minimum deposit required||$8,600||$43,000|
|Time to save||6 months||2 years 7 months|
* Other lenders may use different calculations of household expenses. Keystart always uses the higher of actual expenses and the comparative benchmark.
Keystart aims to help more people into affordable home ownership. Our low deposit home loans may make that dream a reality sooner.