You have a steady income and think you can make the monthly payments on a low interest loan, but with a down deposit and Mortgage Insurance to worry about, owning your own home still seems far off from reality. What can you do to get out of the monthly renting cycle and make your money go towards establishing a financial asset?
KeyStart Home Loans
Established in 1989, KeyStart is a government-supported loan program aimed at helping West Australians
who are having trouble obtaining a loan to buy a home. Compared to other loans, Keystart offers variable rate loans with very low deposit requirements that do not require mortgage insurance.
Unlike the First Home Owner Grant and Stamp Duty Concessions from the WA Government, KeyStart Home Loans are available to all qualified home buyers in Western Australia whether they are buying their first home or their third. KeyStart Loans are available for both buying established homes and constructing new ones.
To qualify for a KeyStart home loan you must meet certain income and debt requirements, and you are limited on the price of the property you purchase. Income for those in metro areas should not exceed $90,000 for singles, $130,000 for couples and $130,000 for families.
Regional residents cannot exceed income of $110,000 for singles, or $130,000 for couples and families. Debt payments must be below 10% of gross income. Property purchases for a Keystart loan are capped at $470,000 in metro areas and $500,000 in Regional areas.
Saving for a deposit is one of the biggest obstacles to homeownership. A standard 20% deposit on a home valued at $300,000 would be $60,000. With a Keystart home loan, only 2% of the purchase price is required for deposit on homes up to $470,000 in value.
Lenders Mortgage Insurance
With most loans, Lenders Mortgage Insurance (LMI) is required when a deposit is below 20% of the purchase price. For many Australians, the extra expense of LMI is a significant barrier to purchasing a home. With Keystart Loans, LMI is eliminated even with a 2% deposit, making purchasing a new home that much more affordable for qualified buyers.
Based on financial need, Keystart also offers a shared ownership option where the Department of Housing co-owns up to 40% of the property. If your financial situation improves, you are able to subsequently buy the remaining shares for full ownership of your property.
Specialized KeyStart loans are available as well. Aboriginal home loans are designed to support Aboriginal and Torres Strait Islanders to buy an affordable home. The Disabilty home loan provides those with permanent disability or their caretakers with a loan for purchasing a home, and the Goodstart home loan is designed for Department of Housing tenants to buy a home under a shared ownership arrangement.
Not everyone is suited or qualified for a Keystart loan. The requirements can be stringent, property purchase prices are capped, and the loan term of 30 years may be too long for many. However, for moderate income earners having trouble saving up enough for a deposit, Keystart loans may be the answer to their dreams of homeownership.
For those West Australians looking to buy their first home and break the rent cycle, it pays to take a look at all your options. First Home Owners Centre offers assistance and advice with the financial side of buying a home. Contact us today to find out more about Keystart Loans and other financing options, and learn how we can help you get into a new home.