Answers to all of the questions you have about using OwnHome Deposit Boost, including:
This article aims to provide fair, balanced, factual information about the OwnHome Deposit Boost loan product.
To be super clear, this is simply factual information - not general or personal financial advice.
OwnHome Deposit Boost is basically getting a loan for your house deposit, so you can buy your home sooner than the traditional path of saving up a house deposit over several years. When using OwnHome Deposit Boost, you end up with two loans that cover 100% of the value of the property:
This means that you have zero equity in the property when you first buy it as it's 100% funded by debt.
They are an authorised representative of an organisation with an Australian Credit Licence and they have high-profile backers such as the Commonwealth Bank's venture fund, so you might consider them “legit” in that sense.
Compared to the traditional path of independently saving up a 20% house deposit, the advantages of using OwnHome Deposit Boost include:
Compared to the traditional path of independently saving up a 20% house deposit, the disadvantages/risks of using OwnHome Deposit Boost include:
OwnHome charge clients in two key ways for their OwnHome Deposit Boost loan:
The OwnHome Deposit Boost loan has a variable rate roughly 8% p.a. higher than a typical home loan interest rate. As at May 2024, this puts the OwnHome Deposit Boost loan’s comparison rate at roughly 14% p.a..
Unfortunately, OwnHome doesn’t seem to explicitly mention the Deposit Boost loan’s interest rate anywhere on their website, but it can be reverse engineered based on the interest rates mentioned in OwnHome’s example. If the primary mortgage’s interest rate is 5.99% p.a. and the combined interest rate is 7.63% p.a., then the Deposit Boost loan’s interest rate must be around 14.2% p.a. (i.e., 80%*5.99% + 20%*14.2% = 7.63% combined). In other words, the Deposit Boost loan’s interest rate is roughly 8% p.a. higher than the standard home loan rate quoted in the same example.
No, "OwnHome customers can only choose from a small group of lenders for their main loan. The two Mr Bowe named were non-bank lenders Resimac and Homestar. None of the big four banks are lending to OwnHome customers, despite Commonwealth Bank’s x15ventures being among its investors" according to the AFR as at September 2023.
Yes, while OwnHome's website doesn't indicate a minimum income threshold, online comments suggest that OwnHome rejected applications where household income was less than $150k p.a. (Reddit, Google).
While the $150k p.a. threshold has not been confirmed, it seems believable as it would be tight covering deposit loan repayments, on top of home loan repayments and general living expenses, on less than $150k p.a. (around $9k per month after-tax).
OwnHome’s business model significantly changed in July 2023. OwnHome launched its current product (“OwnHome Deposit Boost”) in July 2023 and stopped offering its rent-to-buy scheme. This means that popular articles published in 2022 and early 2023 are all out-of-date now and are more likely to confuse than inform.
To help you make sense of it all, the following popular articles and posts contain out-of-date information as they were published before July 2023, so you're probably better off ignoring them:
There are many alternatives to using OwnHome. The right option for you will depend on a range of factors, including your property price growth expectations, income, savings, occupation, scheme elibility, and access to the bank of mum and dad. We’ve outlined the most common options in the table below and ranked them by how quickly someone could buy a home. To keep it simple, we’ve made a couple key assumptions:
Option | Years until buy | Upfront funds required | LMI / low deposit premium1 | Initial equity | Interest rate difference2 | Key restrictions |
---|---|---|---|---|---|---|
Buying with no deposit thanks to the Bank of Mum and Dad | <1 year | $0 (-) |
$0 (-) |
$0 (-) |
No premium | Willing and able parents |
Buying with an unsecured personal loan as 5% deposit | <1 year | $0 (-) |
$35k (4.4%) |
$0 (-) |
+0.9% p.a.3 | High income |
Buying with an OwnHome Deposit Boost loan | <1 year | $18k (2.2%) |
$18k (2.2%) |
$0 (-) |
+1.6% p.a.4 | High income |
Buying with a 5% deposit using Government’s First Home Guarantee | 1-2 years | $40k (5%) |
$0 (-) |
$40k (5%) |
No premium | Price caps, limited spots5 |
Buying with a 5% deposit and paying LMI | 1-2 years | $40k (5%) |
$35k (4.4%) |
$40k (5%) |
+0.5% p.a. | N/A |
Buying with a 5% deposit and getting LMI waived via a “professional loan” | 1-2 years | $40k (5%) |
$0 (-) |
$40k (5%) |
+0.5% p.a. | Specific occupations only |
Buying with a 10% deposit and paying LMI | 2-3 years | $80k (10%) |
$18k (2.2%) |
$80k (10%) |
+0.3% p.a. | N/A |
Saving up a 15% house deposit independently and using lender that waives LMI for 85% LVR | 3-4 years | $120k (15%) |
$0 (-) |
$120k (15%) |
+0.1% p.a. | Specific lenders only |
Saving up a 20% house deposit independently | 4-5 years | $160k (20%) |
$0 (-) |
$160k (20%) |
No premium | N/A |
1 Rough LMI estimates based on Home Loan Experts LMI premium tables. Actual amounts will vary based on lender and state/territory (stamp duty). Converted from "% of loan" to "% of property price" using relevant loan-to-value ratio (LVR).
2 Interest rates compared to traditional 80% LVR home loan based on research by Mozo regarding average variable interest rates by home loan LVR tier.
3 Estimated combined interest rate 0.9% p.a. higher based on combination of 95% home loan at 0.5% p.a. above standard home loan interest rate due to high loan-to-value ratio (LVR) and 5% personal loan at 8% p.a. above standard home loan interest rate due to loan being unsecured. Money.com.au indicated that the average interest rate on unsecured personal loans was 13.87% p.a. in 2023 when the average home loan rate was around 6% p.a..
4 Estimated combined interest rate of 1.6% p.a. higher reverse engineered from OwnHome's example on their website - see interest rate section of this article for details.
5 There are limited spaces available and price caps apply when using the Government's Home Guarantee Scheme.
Our financial coaching program can help you shave years off your home buying timeline by aligning your spending with your priorities and putting your savings on auto-pilot. We would love to help you kickstart your house deposit savings, so you can buy sooner and avoid potential property price rises.
Book a free 15-minute call today, so we can discuss how financial coaching could help and answer any questions you may have.