1. What do I do if the tool does not appear to be working?
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2. What does the tool tell me?
The buy now or wait and save tool provides a financial comparison of 2 outcomes - buy now using LMI, or wait and save a larger deposit.
3. What if the result says to wait?
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This means that the savings rate is increasing faster than any equity could be built based on current data.
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Take into consideration the time it takes to save and circumstances such as can the borrower live with the in-laws for another 2 years and in that period how many times will rent increase?
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This is a financial comparison only, and doesn’t include the intangible benefits such as piece of mind, or the ability to renovate and add value.
4. What if the result says to buy?
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This shows how much equity will have been built based on current data and relies on property growth rates to remain consistent.
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Ensure that everything else is taken into consideration, and most importantly, that the borrower can afford the repayments. Be sure to factor in an interest rate buffer.
5. Why would you pay LMI?
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LMI enables the purchase of property with a deposit of less than 20%, getting a borrower into a home sooner than waiting and saving.
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LMI can be paid up front, or in addition to a monthly premium, which in most cases is very affordable.
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Some borrowers who have a high savings capacity on top of their rent can afford to wait, but others will struggle as their costs of living continue to increase.
6. What are the assumptions?
There are a number of default assumptions, which are explained in detail below, these may be altered by the lender or broker to customise the scenario to that particular borrower.
About the adjustable assumptions:
The adjustable assumptions in this tool have been defaulted to represent current market scenarios, based on current market rates, or averages based on historical trends and market data. They are designed to allow maximum customisation based on individual borrower circumstances.
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Interest Rate – Based on the average variable rate of Australia’s major banks.
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Loan Term – Average of 30 years is based on Genworth’s portfolio.
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Purchase Costs – Typically include stamp duty, mortgage duty, legal costs and removalists. Excludes LMI costs and any First Home Buyer entitlements.
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Target Deposit Percentage – LMI is typically payable on loans with a deposit of less than 20%. This may vary according to lender and is adjustable accordingly.
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Capitalised LMI – The option is available to capitalise, or add, the LMI premium onto the monthly mortgage repayments. This option is taken by approximately 65% of borrowers, according to the 2008 Genworth Financial Mortgage Trends Report.
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Marginal Tax Rate – Based on dual average household income of between $80,000 to $180,000.
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Pre-Tax Investment Rate – Implies a 7% annual return on savings, based on the long term average cash rate. This is then used to calculate an after tax investment rate based on the marginal tax rate input above.
About the fixed assumptions:
The fixed assumptions of maximum allowable loan, and LMI premium cut-off LVR are based on Genworth's credit policy.
Please note – this tool does not assess serviceability, and assumes the borrower can meet any suggested mortgage repayments.
7. Where should I go if I have more questions or any feedback?
If you have any questions that are not answered here, or any feedback regarding the tool please email buynoworsave@genworth.com or contact your Genworth sales representative.
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