Homebuyers who haven’t saved up a 20 per cent deposit will be able to avoid thousands of dollars in insurance costs under a new banking initiative.
NAB subsidiary UBank has revealed it will let people with a 15 per cent deposit buy a home to live in without having to fork out for lender’s mortgage insurance.
The major change means someone looking to take out a loan of $480,000 could avoid $5000 worth of fees if they have saved up $72,000 (15 per cent) instead of $96,000 (20 per cent) as their deposit.
UBank chief executive Philippa Watson said reducing the threshold would shave off roughly seven months of saving for home buyers.
“We know saving for a home deposit takes an average of 4.6 years, rising to over eight years for Sydney-siders,” Ms Watson said.
“By only requiring a 15 per cent deposit and waiving the need for lender’s mortgage insurance, UBank can help shave nearly seven months off the process.”
Ms Watson noted the lender’s mortgage insurance could add tens of thousands of dollars to a mortgage plan and was an additional expense buyers could do without.
“Lender’s mortgage insurance protects the bank, it doesn’t protect the customer,” she said.
“So the amount people pay towards lender’s mortgage insurance is money ideally which can be put into their deposit or paying down their loan.”
Latest CoreLogic data shows property prices nationally rose 1.8 per cent in April, with the biggest gains felt in Darwin and Sydney.
Ms Watson said a reduced deposit could mean a homebuyer could be able to buy a property at a cheaper price than in six months, as prices continue to rise.
UBank will offer loans with a loan-to-value ratio between 80 and 85 per cent with a variable interest rate of 2.49 per cent, or a three-year fixed rate at 2.05 per cent.
The bank also offers one of the lowest three-year fixed rates at 1.85 per cent for customers with a loan-to-value ratio of less than 80 per cent.