An initiative of the West Australian Government, Keystart Home Loans provides options for those homebuyers who may not necessarily meet the eligibility requirements of mainstream lenders.
Keystart Home Loans began operation in 1989, with their prime objective being to provide low deposit home loans to West Australians. This Government Assisted Finance is available to individuals and families who require financial assistance to get into their own home and out of the rental trap for as little as 1% savings.
Keystart Home Loans are available for both first home buyers, and those who have previously owned a home before, with the condition that the home must be for owner occupation – that is that you should live in the property, and not as an investment property. To be eligible for the Government assisted home loan, you also must not have another property in your name.
Mainstream lenders require prospective buyers to show genuine savings as a deposit – usually from 5% to even 20% in some cases. This can obviously prove impossible for many people – especially when you consider that could be $75,000 for a purchase price of $375,000.
In contrast, with government assisted home loans, the deposit required in the metropolitan area is only 2% of the property purchase price. Of this 2% deposit, borrowers no longer needed to show genuine savings of 1% of the purchase price, and for first home buyers, the First Home Owner Grant can contribute towards the deposit.
First Home Owners Grant
Another aspect of Government Assisted Finance is of course the ability to use the First Home Owners Grant as deposit. The First Home Owner’s Grant is a Government scheme introduced to assist those West Australians buying their first home. It is a one-off grant payable to those building their first home who satisfy the eligibility criteria.
To be eligible for the First Home Owner’s Grant, purchasers must be:
- Over eighteen years of age,
- An Australian citizen or permanent resident
- Have never owned a residential property in Australia
- Must occupy the home purchased as a principal place of residence for a continuous period of six months, within twelve months of completion of the house.
- The West Australian government is currently offering a $10,000 grant to those eligible and building their first home. There is currently no financial grant available to those purchasing an established (already lived in) property, aside from stamp duty exemption.
Of course, there are many benefits of the First Home Owners Grant for those looking to purchase property. The one-off payment of $10,000 is a considerable contribution that many people don’t have access to. The great thing about the grant is that it can be used towards your deposit, taking the pressure off of having to save that much before applying for a loan.
Lenders Mortgage Insurance
In addition to the benefits of offering low deposit home loans, Government assisted finance also offer loans without Lenders Mortgage Insurance. Lenders Mortgage Insurance is an insurance policy that protects the lender in the unfortunate event that the borrower defaults on the home loan. While the Insurance covers the Lender, the premium is charged to borrowers, and can be 3% of the Loan value.
Using the example of a $375,000 purchase price, and borrowing 95% of this through a mainstream lender, a borrower could expect to be charged as much as $10,500 just for Lenders Mortgage Insurance. Keystart Home Loans offer West Australians the opportunity to build their own home without charging this fee.
To ensure that their borrowers can sustain their homeownership journey, Keystart maintains strict criteria. With their application requirements, Keystart put standards in place to make certain their borrowers will be able to comfortably make repayments on their home loan.
As with anything in life, there are advantages and disadvantages to Lenders Mortgage Insurance (LMI). First off, it provides access to home ownership for those who may not necessarily be otherwise able to purchase a property. This includes low income, low equity or high-risk borrowers. It also means that they have access to the loan sooner, as there’s no need to save for a larger deposit. In terms of the disadvantages, taking out LMI doesn’t necessarily take away your liability to pay the premium if you default on your loan. In addition, there is a cost to pay to ensure you are covered. While the premium may sound low, the money could be better spent paying off your mortgage directly.
Assisted finance limits
There are also some limits in place – the maximum income applicants can earn to be eligible for Government Assisted Finance is $155,000 for couples or singles with dependents, and less for single applicants without dependents. The maximum property price in the metropolitan area is $480,000
If you are building, mainstream lenders will expect repayments during the construction phase of the full interest charge on the loan. With the government assisted finance that Keystart Home Loans provide, borrowers are only required to pay $50 per week towards the loan during the construction process.
Government assisted finance can also allow West Australians who may have had adverse credit in the past achieve home ownership. If the previous debt has been resolved and satisfactory credit behaviour can be evidenced subsequently, borrowers can still take advantage of Keystart Home Loans.
Eligibility for government assisted finance is conditional upon the borrower being a permanent resident of Western Australia, being over eighteen years of age, and the borrower’s intention to live in the property as their principal place of residence for the life of the loan.
Government assisted finance helps West Australians who cannot obtain finance through traditional lenders for whatever reason achieve the “Great Australian Dream” of home ownership. Keystart’s offer is unique in the West Australian home loan market, with low deposit options, no lenders mortgage insurance, and no ongoing monthly account keeping fees. This product provides West Australians an affordable option to home ownership.
Using grants to your advantage
Easier access to a home loan means you can take ownership of your dream home faster. Indeed for some, it’s a requirement of even being able to consider buying their home. Initiatives by the Western Australian government, including Keystart Home Loans, the First Home Owners Grant and offering loans without LMI means even those who are not eligible for mainstream lender loans can have access to funds to purchase their property.
If you need help designing and building that Australian dream of yours, contact Gemmill Homes today. We can build the perfect home for your family!