First-time home buyers cannot afford 20 per cent deposit

First home buyers are struggling to produce a 20 per cent deposit for their property, a new survey has revealed.

Four out of five first home buyers were unable to come up with the sum last year, forcing many to rely on Lenders Mortgage Insurance (LMI). 

The Mortgage Choice 2017 First Home Buyer Survey found that 81.8 per cent of young buyers had to borrow in excess of 80 per cent of the purchase price. 

Lenders mortgage insurance protects the lender in the event the buyer is forced to default on the home loan.

When lenders agree to lend a customer money, there is a small risk that they won’t get the money back if the customer is not able to meet the repayments. 

The insurance allows lenders to protect their money and helps buyers into their home sooner.   

The higher loans mean many were stuck paying LMI, but Mortgage Choice broker Bob Korver believes the option is not always a bad move. 

‘Some buyers may choose to delay their property purchase in order to save a sufficient deposit and avoid LMI,’ Mr Korver told the Daily Telegraph.

Mortgage broker Bob Korver believes Lender’s Mortgage Insurance is a good choice for those wanting to get into the property market while prices continue to rise

‘However property prices are constantly rising and the longer you delay when you buy, the more likely you are to miss an opportunity to get on the ladder.’

Mr Korver believes the scheme is a good choice for those wanting to get into the property market while prices continue to rise. 

An extra year saving money for a deposit may mean buyers miss out on a property, and exceed the LMI they would have paid by buying earlier.

While many avoid paying LMI, and others have the alternative option of the ‘bank of mum and dad’, Mr Korver said the scheme was viable for many.