Q: What are the benefits of a first home owners loan?
A: Here are some of the benefits:
- Lower deposit requirements
One of the most significant benefits of a First Home Owners Loan is the lower deposit requirements. Generally, first home buyers can borrow up to 95% of the property’s value, which means they only need to save a 5% deposit. This can be a significant advantage for first home buyers who may struggle to save a large deposit while also paying rent and other living expenses.
- No lenders mortgage insurance
Another benefit of a First Home Owners Loan is that first home buyers may be exempt from paying Lenders Mortgage Insurance (LMI). LMI is a one-off insurance premium that lenders may require borrowers to pay if they have a deposit of less than 20% of the property’s value. However, first home buyers who take out a First Home Owners Loan may be exempt from paying LMI, which can save them thousands of dollars.
- Access to government grants and schemes
First home buyers who take out a First Home Owners Loan may also be eligible for government grants and schemes. In Australia, the First Home Owner Grant (FHOG) is a one-off payment to assist first home buyers with the purchase or construction of a new home. The amount of the FHOG varies depending on the state or territory, but it can be a significant financial boost for first home buyers.
- Competitive interest rates
First Home Owners Loans often offer competitive interest rates, which can be lower than other types of loans. This can save first home buyers thousands of dollars over the life of the loan.
- Flexible repayment options
Many First Home Owners Loans also offer flexible repayment options, such as the ability to make extra repayments or redraw on any extra payments made. This can be helpful for first home buyers who want to pay off their loan faster and save on interest.