In today’s property market, it’s no secret that young people face significant challenges when purchasing their first home. Inflation, rising living costs, and soaring property prices are making it harder than ever to save for a deposit. In fact, in 2024, the average deposit required by first-home buyers in Australia is $159,000—an increase of over 50% since 2020 (Core Logic 2020, 2024). With rising house prices, waiting to save a full 20% deposit could mean missing out on potential capital growth, or missing out entirely – price growth is always going to outpace the average savings rate in today’s market.
A smart way to fast-track your entry into the property market is by paying for Lenders Mortgage Insurance (LMI). While some may see it as an unnecessary expense, viewing LMI through the lens of capital growth reveals it as a valuable investment rather than a wasted cost.
The Cost of Waiting
In 2024, the median combined capital city house price is $855,877(CoreLogic 2024). If you’re saving for a 20% deposit, you’d need $171,175, a sum that could take years to accumulate. During this time, property prices will continue rising. For example, between 2019 and 2024, the median capital city price increased by $259,000, a rise of about 43.6%. That’s an enormous jump, meaning that waiting to save for a larger deposit could price you out of the market altogether (Core Logic 2019, 2024).
In 2023 alone, the median price increased by $58,062. If you had bought a house in 2023 with a smaller deposit and paid LMI, you would have already seen 7% growth in equity today (CoreLogic 2023, 2024) . On the flip side, if you spent another year saving, you would still likely need to pay LMI, as prices would have outpaced your savings ability. Trying to out-save the market is a losing game, especially with inflation and property prices rising faster than the average Australian’s ability to save.
Why LMI is Worth It
Paying LMI allows you to get into the property market sooner, and in most cases, this means you will quickly recoup the cost through capital growth and benefit from the long-term upward trajectory of the housing market.
You Can’t Out-Save the Market
With rising costs of living and a declining household saving ratio in Australia (as low as 0.9% in 2024), fewer Australians can save enough to meet the 20% deposit requirement (CoreLogic 2024). Many spend more of their income on necessities, leaving little room for savings. Meanwhile, property prices continue to climb, creating a catch-22 for aspiring homeowners: the longer you wait to save, the more difficult it becomes to afford a home.
LMI as a Strategic Move
The reality of today’s property market means paying LMI is often a strategic move that can fast-track your property goals. By opting to pay LMI, you’re gaining access to the market sooner, which can lead to significant financial benefits over time. As prices rise, the equity you build quickly outweighs the initial cost of LMI.
If you’re serious about entering the property market, don’t let the idea of paying LMI deter you. Speak with our experts at OpenCorp to learn how you can leverage LMI to fast-track your property goals and start building equity sooner
