Keystart new loan limit $450k 2% dep

hi new guy on the block
just to share for the other keystart newbies looking at loans

$450 000 at 2% dep

http://www.keystart.com.au/Products_Metro1.php

2% deposit? How incredibly irresponsible :/

How is 2% deposit any different to 100% LVR offered by large lenders like Rams or our current mortgage of 95% LVR by NAB.. a 2% deposit probably has other limitations and possibly strict valuations but i dont believe 2% deposit is irresponsible.

*maximum* income limit? how very strange.

If you can't afford at least a 10% deposit, you cant really afford the mortgage. It leaves no room for circumstances changing.

What a load of twaddle , I'm sorry but I only had a 5% deposit due to not selling my uk properties and easily afford my mortgage every month.

The amount of deposit has no relation what your affordability is each month.

100% agree. Everyone has the right to own their own property. What if you're renting and as a result can't save a decent deposit... and yes circumstances do change but you can't sit there worrying about the possibility of maybe in the future something might happen and the you can't afford it. and like chripark said, having a deposit does not change that one bit.

Err.. no it just reduces the amount you pay per month. Which increases affordability.

You would be mad to buy a $450k property with 2% deposit.. and even worse, they cap out the wage you can earn, so they are playing the long pure interest game, which means your also probably locked in for some period of time and get slugged a massive fee.

If your renting, and cannot save a 20% deposit, home owning isnt for you. The mortgage payments on that place would be over $3k a month on current rates, and nearly $4k a month on extended rates.

Even if the rent is $2k a month, thats $2k a month saved, or $24k in a year.

Exactly humble, 24K a year, if you can't save a 20% deposit then home owning definitely isn't for you. It's the reason that many owners in the new estates are in strife, they get a new house and land package on a 2% and sometimes NO deposit, which means the majority of the time they can't afford it. One of them loses their job or the situation changes, and they lose their house in 3 months as they have no savings. Saving for a house deposit shows the banks numerous things, you can afford it, you can save and be disciplined enough to have a savings goal and achieve it.

Just because you can afford to pay the mortgage every month, if you're paying minimum and can't afford anything else, then you'd be paying almost $300,000 in interest over the 25 or 30 year period. A sizeable deposit reduces the mortgage, and the interest paid.

Actually no. We were renting for $2200 a month and our mortgage is going to be $2500 so the difference isn't huge we just moved out to the outer suburbs to be able to do that.

And secondly most banks allow 5% deposit I know we did with one of the big banks.

Thirdly and that's the most important part, deposit has nothing to so with affordability a deposit is about the risk the bank/lender is willing to take with the loan, so if they end up taking possession of the property they wont end up with a huge loss. The affordability/servicing depends on income not deposit. The bank is not going to lend you more than what you're able to afford. For a long time you could borrow money without a deposit until the cfg in 2008 which while due to bad lending (but more with the loan servicing than deposits people paid) the banks then started to restrict their lending criteria out of fear of losing more money. So like a said the deposit is about the risk of default and not servicing the loan.

Actually, a bank will lend you more then you can afford, up to 80% of income in most cases. The banks dont lose money, you dont pay, they sell your house. Its the buyer who loses. Mortgage insurance that you pay is to cover the bank. Not you.

Anything over 30% of income as minimum payment is a stressful housing situation. Especially if its dual income and one loses work.

To take on a 2% or even 5% loan is extremely risky financially.

Exactly humble, 24K a year, if you can't save a 20% deposit then home owning definitely isn't for you. It's the reason that many owners in the new estates are in strife, they get a new house and land package on a 2% and sometimes NO deposit, which means the majority of the time they can't afford it. One of them loses their job or the situation changes, and they lose their house in 3 months as they have no savings. Saving for a house deposit shows the banks numerous things, you can afford it, you can save and be disciplined enough to have a savings goal and achieve it.

Just because you can afford to pay the mortgage every month, if you're paying minimum and can't afford anything else, then you'd be paying almost $300,000 in interest over the 25 or 30 year period. A sizeable deposit reduces the mortgage, and the interest paid.[/quote]

A 10% deposit is not going to make a difference in that case. The difference in repayments between $300k and $270k is $100-$200 a month which is not the big huge saving that is going to make a difference if they lose their job. Anyone is at risk of losing their jobs at some point whether they put a 2% deposit or 10% or even 20%.. yes their repayments will be reduced sightly but that's not say they should borrow or that they can't afford it.

I have no idea about affordability etc etc etc, but we didn't even have a 5% deposit when we got our loan - we had been renting for six years and while we had saved about a 10% deposit last year - though we hadn't saved it 'as' a deposit, we went on a 4 week holiday instead - we had no plans to buy/build when we did. We decided to build because the building boost was finishing and we didn't know how much longer the FHOG would run for, so we went for it.

The repayments on the loan are also less than 30% of our income.

Obviously doesn't happen with everyone, just a situation we had...just because you haven't got a deposit, it's not necessarily because you can't afford it

I think the main issue is how much you actually borrow.
We have borrowed 95% but out repayments will be similar to our current rent... But the hope at least is rents will increase while our mortgage payments will at least be similar in proportion to out income.

It is possible one of us might lose our job or we might have a baby but that was just as likely in living in the rental market. We've fixed our loan for the first 3 years so we know where we are at... Beyond that we have to wait and see what happens.....

Actually lets break it down.

A 450k loan.. - 2% deposit = $441k

$441k with 8% interest over 25 years is $3403 per month.. paying $580k in interest!

10% deposit = $405k.. base repayments are: $2971 per month.. however, if you paid $3403 instead, you would save 11 years on your loan..

20% deposit = $360k base repayments are: $2641 per month.. however, if you paid $3403 instead, you would save: 15 years 9 months!

See where I am going here.. save now to not pay later..

2% deposit is naive.. and basically financial stupidity..

So you would rather someone pay someone else's mortage for years and years just coz they dont have deposit instead of taking buying a house with a small deposit which may take a long time to pay back but at least it will be their own..

It may be financially stupid for people who have plenty of money but for average everyday people sometimes its their only option..

And finally when they say up to $450K its obviously that is their upper limit which means the average loan they would be lending would be $200k-$300k which is a small house..

So i think its time we get off our high horse and understand that there are people out there who have limited options and they have the right to own a house just as anyone else.. so if it means they live an average life with no extravagant lifestyle in order to afford to pay for their house, some people are willing to do that..

it's not just an extravagant lifestyle, it's the fact if anything happens in their life, they can lose their house within months. And the fact they are paying almost double in interest only over the life of their loan. Humble is right, it is financial stupidity, but people make their own choices in life so it's up to them, just don't complain when they lose their house to the banks which is what happens on shows like Today Tonight and A Current Affair.

But that argument doesnt make sense.. because for the majority of families these days, if something happens in their life whether they paid a deposit or not, whether they have mortgage or are paying rent, they will be in trouble..

Actually the net effect of the 25 year term would be they have paid 1.1million for a house worth $450k + growth (which for a outer area is slow at best) so they might get $600-$700k in 25 years time. (if)

They have financially sacrificed their life? for a house? You can rent the same house you would build for half the cost.

I understand your point, however it doesnt matter what the loan amount is. I am not on a high horse, I am on my horse, which says this is financially irresponsible of both the lender and the buyer.

If you cannot afford to save at least a 10% deposit over the previous 2 years how do you honestly expect these people to manage with a mortgage? Rent is under half what the mortgage would be. So your saving half of that a year. For people in this circumstance its time to assess priorities.. maybe rent and share rooms out, live with the folks longer, there are plenty of 'options'

It's because they don't have any left over for savings. So they live week to week, but if anything happens to their job they lose their house. They haven't paid off any extra on their mortgage, so they have nothing to fall back on in worse case scenario.

Anyway, each to their own, just don't come crying poor when the banks take their house.