Queensland Housing Finance Loan - 2% Deposit and No LMI - Too Good to Be True?

Hi all,

My partner and I are in the market to buy our first home in Brisbane. We have been looking around and speaking to different mortgage brokers about home loans and what deals are available for us. We currently have a 5% deposit for a housing up to $500K (and continually saving). However, the cost for Lends Mortgage Insurance is such a killer to pay for when you don't have a 20% deposit :(

While doing some research, I came across Queensland Housing Finance which is essentially a home loan offered by the Qld Government. Link is here https://www.qld.gov.au/housing/buying-owning-home/financial-....

What attracted me to this home loan is that you only need a 2% deposit and you don't have to pay LMI. The eligibility requirement seems quite relaxed and I think we may qualify. So I gave them a call today (twice actually lol) to find out more information and they told me the following additional information:

  1. Its an alternative option for a home loan where you have been declined by private lenders (i.e. banks).

I asked them how do you show that you have been declined and the guy said you just need to declare or tell them "with your heart on your hand" that you have been declined lol

  1. There's no off-set account linked to the home loan account.

  2. You can borrow up to $500,000.00 from them. They will assess your income and financial circumstances etc.

  3. There's an application fee of $700.00

  4. Variable interest rate is based on the average interest rates of the big 4 bank - currently 4.77% pa or fix at 3.5% (or something) for 3 years.

  5. You need to get financial and legal advice before signing the loan documents. the website only says financial advice though.

  6. What's the general process? there is no face to face appointment, everything is done over the phone. they essentially find out if you are eligible first based on what you disclose to them and determine how much you can borrow. They then send you an offer of how much you can borrow which is valid for 3 months (kind of like a pre-approval). Once you sign a sale contract, you need to submit that and the loan application form and all the other information they require back to them for assessment.

  7. you should may your sale contract subject to finance for 28 days as it can take that long to process your loan application. And then you should allow a further 2 weeks from when finance is satisfied for them to organise the funds etc for settlement.

  8. You need to show that you have been consistently save money for the deposit for the last 6 months.

  9. You and your partner must have steady employment for the last 12 months. If not then they will only take into account the spouse/partner who has been employed for more than 12 months which means you may end up with a lesser loan.

My questions are:

  1. Does anyone have a Qld Housing Finance loan or have any experience dealing with them?

  2. I feel like this home loan is too good to be true… Am I missing something?

Thanks :)

Comments

  • +14 votes

    How's this too good to be true? It's bloody terrible.

    You're paying interest on 98% instead of 80-90% and you're paying it at a much higher interest rate (4.77%, what the hell?) instead of ~2.8% or so.
    Too many people are borrowing more than they can afford which in turn props up property prices and stuff like this doesn't help.

    •  

      working out how long it will take for 1.8% interest to matter more than LMI is too hard apparently

  • +1 vote

    This is a bad idea. What's your incomes? What price property are you looking at? Why the rush? What proportion of your regular income would be spent on mortgage payments once you buy? 4.77% is a rip - general rates are as low as 2.84% and bulk of mainstream lenders are around 3% at the moment.

  • +1 vote

    Knuckle down and save up that bigger deposit.
    Miracle loans like this were offered to many several decades ago via a govt scheme at the time.
    It allowed many to get into a home with little $ down but they sure paid for it.
    I helped a couple of them remortgage with a regular loan and their repayments were much lower and they were able to pay it out sooner.
    Out of interest, ask them if you can take their offer but take a loan out with a regular lender later on. In those few years your property may increase in value and you may have paid off enough to qualify for cheaper finance..

  • +3 votes

    2% deposit and you don't have to pay LMI.
    alternative option for a home loan where you have been declined by private lenders
    Variable interest rate is currently 4.77% pa

    Ohh Wow ! Subprime mortgage is here.

    We are definitely on track to 2008 US blowout

  • +1 vote

    This can be a good product.

    This is the same thing as we have in WA called KeyStart.

    The premise of this product is this, the government will lend you the money even when you have low deposit and spare you exposure to LMI.

    Please note low deposit does not mean low doc or NINJA loans, the idea of this initiave is to help people who may be renting and finding it hard to raise a 20% deposit to get their foot onto the property ladder.

    In return the government will charge you are higher than market rate of interest as a disincentive to stay with KeyStart. The government wants to help you get into the market then transition away from itself as the lender.

    There are pros and cons of this scheme.

    When prices were going up the borrowers were more easily able to eventually borrow from the private sector.

    When prices fall however, the borrower's ability to refinance with a private lender diminishes.

    Here is a good example of the latter.

    https://thewest.com.au/business/banking/inside-the-state-gov...

    DON'T be like the stupid bitch in this article.

    She knowingly signed on the dotted line knowing the interest rates clearly stated in the document.

    She knowingly bought the property knowing the market can move both ways.

    She knowingly accepted the risks that lending at such a high LVR could easily mean negative euity.

    Yet when the gamble doesn't go her way she accuses the government of putting her in this trap.

    Overall this scheme is positive and has helped many thousands of families into their own homes, but ultimately it is an investment which can move either way.

    Be aware and take this into consideration when deciding if this product is suitable for you.

    •  

      "Unfortunately for recent buyers, a prolonged period of falling house prices threatens to undermine the central premise of both schemes."

      How is that possible? House prices only ever go up in Australia. Get in now, mortgage yourself up to the eyeballs before it's too late!

    •  

      When prices fall

      Just walk away.

      2% is nothing.

      Sounds familiar.

  •  

    4.77%…. WTF. This product is an extreme rip off. I'm paying 3.09% with no fees at all. I could be paying lower still if my house cost more to buy.

    •  

      With who?!

  •  

    How much is your household income? How do you save 5 percent and be on the market though.

  • +1 vote

    It's certainly not "too good to be true" because of the high interest rate.

    If this is your only realistic option for getting a home loan & you've thought about it at length & feel that you will be able to meet the payments, then you should go for it.

    Owning your own home is an important part of the life journey & helps a person feel 'settled' & ready to take on more responsibilities.

  •  

    Thanks for the feedback everyone. I'm quite new to this so still doing my research. Clearly not a good deal :)
    But I can see how this may be an option for struggling families or those who are struggling to save up a deposit due to the financial circumstances.

    • +2 votes

      If a family is struggling to save up for a decent deposit, they should ask themselves if they're going to struggle paying the interest and repayments too.

      •  

        At future interest rates which may be higher. People forget interest rates can be 8%…

        •  

          I would bet on interest rates not getting near 8% in the next couple decades. It would cause massive decreases of property prices and mass defaults and that's a recipe for economic ruin.

  •  

    If the rates you're paying LMI is probably cheaper.. unless of course you refinance down the track.

  • +1 vote

    Don't be so quick to dismiss this because you can get a better rate with the banks through normal lending as pointed out by others already "in".
    Buying a home is not the same as buying a financial investment. You're buying stability.
    I'd be surprised if you haven't already worked out:-
    Would the monthly mortgage be the same as your monthly rent (plus the amount you're putting away each month for your deposit) ?
    Then take into account you will have council rates to pay and insurance enough to cover contents and a rebuild if the worst happens.
    Deduct your bi-annual or annual moving costs you would no longer pay and your bond refund.

    Calculate the cost difference between 3 years fixed and 3 years variable - and go with the fixed ('cause you aint moving for at least 3 years - but house prices will.)

    The ultimate goal would be refinancing with a no frills low rate lender to pay down the mortgage ASAP.

  •  

    OP can you explain why you think this is a good deal?

  • +1 vote

    Don't be deterred by the comments here.

    If you and your partner can commit to saving and/or getting higher incomes into the future and can put this into extra repayments, i would look into the federal government 1st home buyer program whereby you only need 5% deposit & fed gov underwrites your LMI.

    Jump on it while it's there if you and your partner are seriously committed to home ownership and knuckle down and make extra repayments.

    https://thenewdaily.com.au/money/property/2019/11/01/first-h...

    •  

      Fed Govt price cap for Qld <$475k (with 5% deposit) whereas Qld Govt max loan =$500k (with 2% deposit).
      Fed Govt total loans = 10,000 first home buyers.
      $15k first home buyers grant applies to either Fed & State (if qualified)

  •  

    Has anyone heard of this being available in the ACT