A specialist lender has recently come into the market, bringing with it a 100% home loan product for the purchase of owner-occupied homes, freeing eligible borrowers from needing to save for a deposit or purchase Lenders Mortgage Insurance (LMI).
According to Craig Mackenzie, co-founder and director of Granite Home Loans, the new offering is targeted at industry professionals who work in the legal, medical, accounting/finance, IT and engineering sectors.
Eligible applicants must have a tertiary qualification, three years or more of industry experience and meet the minimum income threshold, which starts at $100,000 per year, but varies across the states.
“There are many high quality potential homeowners out there with a fantastic education behind them and a great career ahead of them, who are able to afford to repay a home loan but who probably haven’t seen homeownership as something that is realistically attainable for them in the immediate future,” said Mackenzie.
“Our vision is to help those high credit quality professionals that current mortgage solutions may not be fully catering for by giving them an alternative to enter the market sooner, if that is the path they wish to take.”
Granite intends for the product to not only meet the needs of young professionals looking to enter the market for the first time, but also those starting over with minimal savings, whether after a relationship breakdown, illness, or other extenuating circumstance.
Granite’s 100% home loan solution has an interest rate of 5.99%. After the $3,500 establishment fee, there is no LMI or risk fee payable.
The lender also provides a 97% home loan solution at an interest rate of 5.60%, with the same general terms as the 100% product.
A representative from Genworth, an LMI provider in Australia, explained that it is not an unusual business model to offer 100% home loans without LMI to a niche segment of the market.
However, the spokesperson added, “These loans are considered higher risk and therefore typically attract a higher interest rate. There are also greater capital requirements for lenders of these types of loans to adhere to, which in turn has cost implications for the borrower.”
“So, while a borrower without LMI may not incur an LMI premium, they often incur a higher interest rate making this option more expensive over the life of the loan,” the spokesperson concluded.
Granite has been in the market since the end of last year and its loans are distributed both direct and through intermediaries like mortgage brokers, aggregators, and other referral partners.
“Even though we are a start-up, we are choosing to be very selective in who we partner with – focusing on those organisations that have an aligned vision, whom we are familiar with from our industry experience and who target their business on serving the needs of these types of professional borrowers,” said Mackenzie.