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More South Australian buyers will be able to access a home loan from HomeStart Finance, which announced an expansion of the Graduate Loan that would only need 2% deposit with no lenders mortgage insurance (LMI).

HomeStart Finance CEO Andrew Mills announced the expansion allows more South Australian buyers to have an option outside the other commercial lenders who are requiring a 20% deposit for home loans.

“This will significantly reduce the time needed to save for a deposit for many more South Australian homebuyers, making home ownership a reality, sooner,” he said.

“The 2% Graduate deposit loan is another way in which HomeStart continues to innovate and address housing affordability concerns.”

Eligibility requirements of the Graduate Loan

The Graduate Loan is open for eligible graduates with a Certificate III or higher qualification who are looking to buy a residential home in South Australia.

Here are the requirements to qualify for this loan:

  • Borrowers must have a Certificate III, diploma, degree or higher qualification through a university, TAFE or another Registered Training Organisation, provided in the form of an official academic Transcript or Certificate.
  • They must have evidence of three months continuous employment with the same employer.
  • Applicants must be planning to buy or build a home in South Australia for residential purposes.
  • Borrowers must be an Australian citizen or hold Permanent Residency or skilled migrant status in Australia
  • The minimum age of borrowers is set at 18 years old.
  • Applicants must show a clear credit history.
  • The current rent repayments or savings of the borrower need to be the same or more than the proposed HomeStart home loan repayment amount.

Top features of the Graduate Loan

The Graduate Loan is intended to be a low deposit loan with a lot of flexibility options for borrowers. Here are some of the features of the loan:

  • Low deposit requirement: Borrowers need as little as 2% to buy a home or 5% to build one depending on the location.
  • No LMI: HomeStart will not require borrowers to pay for an LMI even if they have a low deposit.
  • Flexible rate options: Borrowers can choose their interest rate type and have the flexibility to enjoy the benefits of fixed and variable rates through a split arrangement.
  • Ability to borrow more: The Graduate Loan can be combined with a secondary loan to increase the amount that can be borrowed. Most of the time, repayments will only be required for the secondary loan once the primary HomeStart loan has been fully repaid.
  • Repayment Safeguard: This feature allows for a more predictable repayments — initial repayments will be based on the financial situation of the borrower and not just interest rates. This ensures that the only change will be an adjustment for inflation every year.
  • Voluntary Repayments: For those who want to pay off their loans quickly, they can make extra repayments of up to $10,000 for fixed rates for free. Variable-rate borrowers can make unlimited extra repayments at no cost.

Benefits of building a home through the Graduate Loan

Borrowers under the Graduate Loan can choose to build their own home. HomeStart will require a building pack, which should contain all plans and a fixed price contract from a licensed builder. There are benefits to building a home under the Graduate Loan, including the following:

  • It slashes the upfront costs: First-home buyers can apply for the state’s First Home Owner Grant, which will help them obtain an additional funding of $15,000 that they can use towards their deposit and other fees. The fund will be available once the builder pour the slab on the new home.
  • There are no repayments for the first nine months: Repayments will only be required nine months after the approval of the loan or until the construction is complete, which ever comes first.
  • Borrowers can save on stamp duty costs: Buying a land to build on will only require buyers to pay stamp duty on the land value.
  • Borrowers have a lot of time to save: Applicants can buy a block of residential land and build on it later, giving them time to save and reduce their home loan balance by the time the construction commences.

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Photo by rattanakun on Canva.

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