If you borrow more than 80% of the value of the property you're buying, you will need to pay Lenders Mortgage Insurance (LMI). This insures your lender (not you, the borrower) against non-payment or default. By protecting your lender against default, LMI allows you to borrow with lower deposits. Your lender will organise LMI on your behalf, so it's not something you need to shop around for.
The LMI premium you can expect to pay will be based on the size of your mortgage and the purchase price. One of the best ways to reduce the cost of LMI is to save a larger deposit. However, this is not always possible, and to make the premiums more manageable some lenders - like Citibank - let you add LMI to the value of your home loan. This is called 'capitalising' the expense, and it lets you pay the LMI bill gradually rather than adding it to your other upfront expenses.
The LVR refers to the size of your home loan expressed as a percentage of your property's value. For example, if you borrow $300,000 to fund a property worth $375,000, the loan is said to have an LVR of 80% ($300,000 is 80% of $375,000).
Your home loan deposit is usually 20% of the purchaseprice. But to help you get into your new home sooner, many lenders now approve loans with lower deposits.2
Citibank's Low Deposit Home Loan is the ideal solution for getting into your own home sooner. It helps you escape the rent trap and start building wealth in your home. Suitable for customers with strong incomes but limited savings to support their loan, Citibank's Low Deposit Home Loan is available with our Basic, Standard Variable, 100% Offset and Fixed rate loans.2 Your Citibank Mortgage Specialist can provide further details.
Many lenders offer an 'offset' account, which is a savings account linked to your home loan. It can be a great way to save on interest costs because interest charged on the home loan is calculated on the difference between the balance of your loan amount owing and the balance in your savings account.
Let's say, for example, that the balance on your home loan is $250,000, and you have $10,000 in your savings offset account. Instead of being charged interest on the full value of your home loan, interest will be charged on a balance of $240,000 - being the difference between the balance of your loan and the money in your offset account.
A Citibank Offset Savings Account can be combined with our Standard Variable loan to get the best of both worlds - day-to-day access to your money while paying off your mortgage sooner.
This popular loan feature lets you withdraw any additional repayments you have made on your mortgage. It is a useful way to reduce your interest while providing access to your funds. Citibank offers free, unlimited redraws on virtually all of our home loans with the exception of fixed rate loans.
Of course, for a more in-depth review, feel free to speak with one of our mortgage specialists who can help you match the right loan for your needs and discuss strategies that can save you money.
1. Lenders Mortgage Insurance is available up to 90% LVR (inclusive of Lender Mortgage Insurance premium). Conditions apply. 2. The Citibank Low Deposit Home Loan is available for owner-occupied purchases only and repayments must be principal and interest or interest-only loans converting to principal and interest after five years. It is available up to 90% LVR (inclusive of Lender Mortgage Insurance premium). Conditions apply.
