Reserve Bank Meeting

Reserve Bank leaves interest rates on hold


As expected, the RBA Board has decided to keep the official cash rate on hold at the record low of 1.5%. Commentators expect this will continue, with the possibility of another cut before the end of the year. If this happens, conditions will be even more favourable for people who are saving up for their first home.


Lenders mortgage insurance
If you’re a first time homebuyer or an investor, it’s possible the deposit you have is less than 20% of the value of the home you want to buy.  If this is the case, you’ll most likely need lenders mortgage insurance. 


It’s important to realise that lenders mortgage insurance benefit the lender, not you - it protects them if you are unable to make home loan repayments. The benefit of lenders mortgage to you is gives you the option to buy a home sooner, rather than later. However, it’s also important to know that this will add a further expense.


The cost of lenders mortgage insurance depends on your loan – the larger the loan and the smaller your deposit, the more you’ll pay on insurance. Other factors (depending on the lender) may include whether you are employed full time or casually, and whether it’s your home or an investment property.


How to avoid paying lenders mortgage insurance
As the cost of lenders mortgage insurance can be more than you budgeted for, you’ll need to consider the following:

• Stick to your budget. Don’t let your heart rule your head, particularly at an auction. There’s always another home.
• Wait until you’ve saved more money. In the long run, this will make your new home more economically viable.
• Ask for family help. If they agree to a loan, it’s likely the interest rate (if any) will be much smaller than a lender. They may also be able to act as guarantor in order to avoid paying lenders mortgage insurance.
• Get an upfront quote. Cost of lenders mortgage insurance depends on the financial institution. 

It’s best to know upfront whether or not you need lenders mortgage insurance. That’s where we can help – give us a call and we’ll help you navigate the home loan application process.


Until next month,

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