FHBs offered monthly LMI option: Resi

With so many first home buyers priced out of the market, following eight consecutive cash rate hikes, expensive stamp duties, and land taxes on top of inflated house prices, Yellow Brick Road’s Mark Bouris has announced a buy now, pay later method to pay off stamp duty and LMO.

Resi Mortgage Corporation Pty Ltd, owned by the broking franchise and aggregation group Yellow Brick Road, is offering home buyers an option to pay the cost of lenders mortgage insurance (LMI) by the month on their ‘Resi Essential Options Home Loan’.

It comes as the latest Real Estate Institute of Australia (REIA) Housing Affordability Report found that the number of first home buyers to purchase a home decreased to 26,343, a drop of 9.6 per cent during the September quarter, a 30.3 per cent drop compared to the same quarter the previous year.

In addition, Helia’s First Home Buyer Report 2022, indicated that the number of FHBs aiming for a 20 per cent deposit had fallen with only 25 per cent of FHBs compared to 41 per cent in 2019.

The monthly premium LMI solution can make the difference of buying a home now, enabling home ownership sooner.

Thus, given the affordability pressures crippling borrowers, Resi’s monthly premium LMI hopes to support more first home buyers into home ownership.

LMI is designed to protect the lender if the home buyer fails to make the home loan repayments and is generally required by all lenders if home buyers have less than a 20 per cent deposit.

With other lenders, the LMI fee must either be capitalised into the home loan and paid off with interest over the life of the loan (the option most commonly chosen) or paid upfront in a lump sum when the loan is taken out.

Unlike traditional methods of paying the bank an upfront fee for LMI, once the LVR on the property drops below 75 per cent, the monthly premium payments will stop.

In addition, the monthly LMI is said not to impact the loan-to-value ratio (LVR), which means you may be able to borrow up to 95 per cent of the market value of the property, executive chairman Mr Bouris said.

“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 per cent deposit, not whether they can afford the home loan repayments,” Mr Bouris said.

“So, we partnered with Helia, our LMI provider, to offer our customers who are buying their first home the flexibility to pay for LMI monthly.

“Because the monthly LMI fee doesn’t affect your LVR, a greater portion of your loan can be used to buy your home.

“It might make the difference between buying your home now, instead of in another year or two.”

Another benefit of monthly LMI is that it may be more flexible if you pay down your loan sooner, Helia’s chief commercial officer, Greg McAweeney, said.

He explained if you receive a bonus or an inheritance, you can use it to pay down your mortgage and reach the 75 per cent 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.

[Related: Alternate pathways likely to rise among FHBs: Helia report]