Getting home sooner

How LMI can make it happen

Andrea and Mark, in their early 30's with two young children, were determined to purchase their own home and stop their "money going down the drain by paying rent".

Since having Charlie and Anna it was harder to save but they had still managed to build a 5% deposit (with a little bit set aside for fees and incidentals). Their challenge was in finding a lender to approve the 95% loan-to-value ratio (LVR) loan they needed for their dream home.

And the longer they waited, the higher house prices were likely to rise: "We'd calculated we could afford about $400,000 but every weekend looked the same: another auction, a higher sale price," said Mark.

From a combined income of $140,000, rent was costing them $600—every week. Believing that this money should have been going towards a mortgage, they decided to consult a lender about their options.

Pleasingly, Andrea and Mark learnt they could buy a home with their 5% deposit by using Lenders Mortgage Insurance (LMI) provided by Genworth Financial on a high LVR loan. LMI offsets the risk a lender takes on a low deposit loan and lets them offer mortgages above 80% of the security property value. Lenders usually pass the cost of LMI on to the borrower, but this amount can often be capitalised into a loan*; adding only a small additional cost each month to mortgage repayments.

Andrea and Mark could readily meet their mortgage repayments, so LMI enabled them to buy and then start watching the value of their home grow—instead of standing on the sidelines. They've been in their home for six months and couldn't be happier. "Nothing beats having your family under a roof that you own, but 12 months ago I couldn't have imagined every - thing turning out this well. LMI made owning our home happen so much quicker," said Mark.

How Andrea and Mark crunched the numbers

LMI: the benefits

• Enabled Andrea and Mark to own their own home years sooner than would have otherwise been possible
• Allowed Andrea and Mark to start benefiting from potential house price appreciation sooner
• By capitalising the cost of LMI into their loan, they didn't need to save more to pay an up-front premium
• Allowed Andrea and Mark to escape the 'rental trap' and start building equity sooner by owning their own home