What is Keystart and how can it help you buy a home?
Breaking into today's property market isn't easy. Rising prices, hefty deposit requirements, and strict lending criteria create serious barriers for many Australians dreaming of homeownership.
That's where Keystart comes in.
Established in 1989, Keystart is a Western Australian government initiative designed to make homeownership accessible to those who struggle to meet traditional lending requirements. It operates as a transitional lender, helping people enter the property market sooner and eventually transition to mainstream lenders when their financial position improves.
The beauty of Keystart? Lower deposit requirements, no lender's mortgage insurance (LMI), and more flexible lending criteria than most major banks.
How Keystart differs from traditional lenders
Before diving into the specific loan types, let's understand what makes Keystart unique:
- Lower deposit requirements: While most lenders require 10-20% deposits, Keystart loans typically need as little as 2% of the property value
- No LMI: This can save borrowers thousands in upfront costs
- No application fees: Reducing initial costs even further
- Income caps: Designed specifically for low to moderate income earners
- Principal and interest loans only: No interest-only options
- No redraw facility: Keeping the focus on paying down your mortgage
Low deposit loans
Keystart's standout feature is their low deposit requirement, making them a game-changer for Australians struggling to save the traditional 20% deposit. Let's dig into what makes these loans so accessible:
Deposit requirements in detail:
- As little as 2% of the property's purchase price (compared to 10-20% with traditional lenders)
- For a $500,000 property, that's just $10,000 instead of up to $100,000
- You'll need additional funds for settlement costs (typically 3-5% of the purchase price)
- No genuine savings history required - your deposit can come from gifts or government grants
No Lender's Mortgage Insurance (LMI):
- Traditional lenders charge LMI when your deposit is less than 20%
- On a $500,000 property with a 5% deposit, LMI could cost $15,000+
- Keystart eliminates this cost entirely, saving you thousands upfront
Income limits explained:
- Singles: Up to $105,000 per annum
- Couples: Up to $130,000 combined income
- Families: Up to $155,000 combined income
- These limits are reviewed regularly and are higher in regional areas
Property price caps:
- Metropolitan Perth: Generally up to $560,000
- Regional areas: Varying caps based on location
- These caps ensure the program remains targeted to entry-level properties
Repayment structure:
- Principal and interest loans only (no interest-only options)
- Variable interest rates (typically slightly higher than major banks' best rates)
- Maximum loan term of 30 years
- No offset accounts or redraw facilities
Additional eligibility criteria:
- Must be an Australian citizen or permanent resident
- Must live in the property as your principal place of residence
- Cannot own other property in Australia
- Must be over 18 years of age
Other Keystart loans
While low deposit home loans are Keystart's main offering, they also provide several specialised programs for specific needs:
First Home Owner Grant boosted loans: Combine your FHOG with your deposit for new builds, still requiring only 2% genuine savings.
Shared ownership home loans: Co-own your property (70-80%) with the Department of Communities to further reduce upfront and ongoing costs.
Aboriginal home ownership scheme: Specially designed for Aboriginal and Torres Strait Islander people with higher income limits and cultural considerations.
Disability home loans: Tailored for people with permanent disabilities or their families, featuring higher income limits and options for modified homes.
Is a Keystart loan right for you?
While Keystart offers many advantages, it's not perfect for everyone. Here's what to consider:
Potential benefits:
- Get into your own home sooner with a smaller deposit
- Save on LMI costs
- More flexible lending criteria
- Potential stepping stone to traditional financing
Limitations to be aware of:
- Interest rates are typically higher than major bank best rates
- Property value caps may limit your options
- No access to features like offset accounts or redraw facilities
- You must live in the property (no investment properties)
- Only available in Western Australia
How to apply for a Keystart loan
If Keystart sounds like it might work for you, here's what you'll need to do:
- Check your eligibility: Review the income limits and criteria on the Keystart website
- Save your deposit: Start building your minimum 2% deposit plus settlement costs
- Prepare your documentation: Gather proof of identity, income, savings, and expenses
- Speak with a mortgage broker: We can help determine if Keystart is your best option and guide you through the application process
- Get pre-approval: Before house hunting, understand exactly what you can borrow
Let us help you navigate the Keystart process
As mortgage brokers who understand the unique challenges facing first home buyers and those on moderate incomes, we can help you determine whether a Keystart loan is right for your situation.
We'll compare Keystart with other available options, explain the pros and cons clearly, and support you through every step of the application process.
Ready to explore whether Keystart could be your key to homeownership? Contact our team today for a no-obligation consultation and take the first step toward owning your own home.
