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Lenders Mortgage Insurance (LMI) is a type of insurance that protects the lender in case the borrower defaults on their home loan. It’s typically required when a borrower has a deposit of less than 20% of the property’s value.

While LMI doesn’t protect the borrower, it enables them to secure a home loan with a lower deposit, making it easier to enter the property market sooner. The cost of LMI is usually added to the loan amount or paid upfront.

Read more information about LMI.

The Home Guarantee Scheme (HGS) is an Australian Government initiative that supports eligible homebuyers looking to purchase a home sooner, with a low deposit and no Lenders Mortgage Insurance (LMI). Read more about the Home Guarantee Scheme.

You find out if you’re eligible on the Housing Australia website/

The Loan to Value Ratio (LVR) is a percentage that represents the amount of a loan compared to the value of the property being purchased. It’s calculated by dividing the loan amount by the property’s value and then multiplying by 100.

For example, if you’re borrowing $400,000 to buy a property worth $500,000, the LVR would be 80%.

Lenders use the LVR to assess the risk of a loan. Generally, a higher LVR means higher risk. This might lead to the lender taking out Lenders Mortgage Insurance (LMI) or higher interest rates.

Pre-approval for a home loan has several advantages, including helping you set a realistic budget, increasing your negotiating power with sellers, and potentially speeding up the final approval process once you find a property. It can also help reduce stress by providing clarity on your borrowing capacity.

However, pre-approval is typically valid for a limited time and is not a guarantee of final loan approval, because factors like property valuation and changes in your financial situation can still affect the outcome. Additionally, the process involves a credit check, which may slightly impact your credit score, and knowing your maximum borrowing limit might lead to stretching your budget beyond comfortable levels.

Before applying for a home loan, it's essential to prepare thoroughly to ensure a smooth and successful application process. Start by gathering key documents such as proof of identity, income, savings, and liabilities. Understanding your credit score and financial situation will also help you make informed decisions.

For personalised guidance tailored to your specific needs, it's best to speak with a lending specialist. They can provide expert advice, help you understand the application process in detail, and ensure that you meet all requirements. To get started, read our home loan application checklist or speak directly with a lending specialist.