Keystart home loans - Are they worth it?

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Darryl
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Keystart home loans - Are they worth it?

Postby Darryl » Thu Oct 10, 2019 1:53 pm

Hi, I’m in Perth metro and seriously considering a Keystart home loan. I don’t have a big deposit ($10k) so far so, it seems like a good choice seeing as property prices have fallen recently. The house is a $380,000, 3 bedroom house. But their interest rates seem excessively high. I guess my question is are Keystart home loans worth it?

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Otto Dargan
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Re: Keystart home loans - Are they worth it?

Postby Otto Dargan » Thu Oct 10, 2019 3:51 pm

Hello Darryl. Welcome to the forums.

Keystart home loans are designed to make homeownership a reality sooner and are mostly a transitional lender. Their qualifying criteria for low deposit home loans are very lenient in some aspects and can save you thousands of dollar in lenders mortgage insurance (LMI) fees. However, as you’ve rightly pointed out, their low deposit home loan’s interest rates are rather high. Currently, their low deposit home loan interest rate is 4.94% p.a. (comparison rate is 5.03% p.a.)

A good way to look at it is how much extra interest you may have to pay and compare that with how much you’re saving in LMI fees. For a $380,000 property, your home loan amount is ($380,000 less your 2% deposit = $372,400). You’re saving anywhere between $12,000-$13,000 in LMI fees approximately.

Now, you’ll be paying $714,000 over the life of the loan at principal and interest repayment on a 30-year term with that interest rate. However, if you were to get the same loan at 3.94%, over the life of the loan you’ll pay $635,413 in total. You’ll pay an extra $79,000 in interest. At the end of the day, you’re out of pocket ($79,000 less $13000 lmi savings) $66,000.

Ultimately, saving a deposit can be quite tough. So, for those who just want to buy a home now, it could be a fair trade. However, there are a few no deposit home loan options that a lot of Australians are utilising.

Give us a call on 1300 889 743 or fill in our free assessment form to find out if you qualify for a low deposit home loan.

Cheers,
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts

Darryl
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Joined: Thu Oct 10, 2019 1:52 pm

Re: Keystart home loans - Are they worth it?

Postby Darryl » Thu Oct 10, 2019 5:18 pm

Something to chew on, I guess. I’m reading about people being stuck with Keystart at their high rates recently. Why wouldn’t I be able to refinance away from them?

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Otto Dargan
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Re: Keystart home loans - Are they worth it?

Postby Otto Dargan » Thu Oct 10, 2019 7:41 pm

Hi Darryl,

Keystart low deposit home loans work best in a rising market but can become a trap with falling housing prices. As you’re contributing only 2% of the property value for the house and taking out a home loan for the rest at a high-interest rate if property prices fall that means you won’t have the equity to be able to refinance out of the high rate mortgage. Essentially, you may get stuck as a mortgage prisoner.

Cheers,
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts

Darryl
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Joined: Thu Oct 10, 2019 1:52 pm

Re: Keystart home loans - Are they worth it?

Postby Darryl » Fri Oct 11, 2019 4:29 pm

So at what point can I refinance away from Keystart? How much equity do I need for a refinance?

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Otto Dargan
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Re: Keystart home loans - Are they worth it?

Postby Otto Dargan » Fri Oct 11, 2019 4:40 pm

Hi Darryl,

There isn’t a waiting period per se, rather it’s how much equity you have on your home loan. Typically, you’ll require at least a 20% equity in your home loan to refinance without incurring lenders mortgage insurance (LMI). Although, you can refinance your home loan up to 90% loan to value ratio with some of our lenders and up to 95% LVR with a couple of our lenders. Stricter lending criteria apply.

We have almost 40 lenders on our panel so you can rest assured knowing you’re getting the best deal based on your situation.

Give us a call on 1300 889 743 or fill in our free assessment form to find out if you qualify for a 95% home loan.

Cheers,
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts


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