Home buyers often debate whether it’s better to hold off on house hunting until they’ve saved up a bigger deposit or bite the bullet and pay LMI.
Every buyer’s situation is different and may depend for instance on how likely they are to be able to find a bigger deposit and whether they think house prices will rise or fall.
For example, if you’re looking to get a place of your own to start a family in a city with rising house prices, you might find it hard to get close to a 20% deposit.
You may be keen to get into the property market as soon as you can, because you think prices will accelerate faster than your ability to raise a larger deposit.
If that is the case, you might opt to pay LMI because you believe the chance of capital gain in a rising market outweighs the cost of LMI.
Alternatively, you might feel more comfortable waiting until you have a deposit big enough to pay less, or no LMI.
The answer depends on your personal circumstances, as well as factors such as loan amount, house market volatility and interest rates.
Have a word with your mortgage broker or talk to a financial adviser about what’s right for you.
* Restrictions may apply if the security property is in a rural or remote location.