04 Oct 2017

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 only need to show genuine savings of 1% of the purchase price, saved over a three-month period, and for first home buyers, the First Home Owner Grant can contribute towards the deposit.

First Home Owner’s Grant

Another aspect of Government Assisted Finance is of course the ability to use the First Home Owner’s 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.

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.

Assisted finance limits

There are also some limits in place – the maximum income applicants can earn to be eligible for Government Assisted Finance is $135,000 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.

This article was written by Central Lending Solutions (CLS), a Perth based finance broking business with over 20 years experience in the finance industry. We specialize in construction finance and but can assist our clients in all aspects of finance.