Are you eyeing that dream home but limited by the amount of deposit you have to come up with? As we know, borrowings above 80% normally would incur Lender’s Mortgage Insurance (LMI), a significant upfront cost normally in the tens of thousands of dollars. This not only presents a financial burden but could also mean requiring a larger upfront deposit.
The good news is, if your occupation or profession falls within a selected field that has the LMI waiver policy with certain lenders, you might just be in for significant savings. If you are currently working as a doctor, lawyer, accountant, or within the qualified medical field, you have the privilege of not incurring LMI costs when borrowing as high as 90% or even 95%.
The Power of LMI: Understanding the Impact
Lender’s Mortgage Insurance (LMI) serves a vital purpose in the mortgage landscape. It acts as an extra safeguard for lenders, providing them with additional protection when lending to borrowers with low deposits. Traditionally, borrowers with deposits less than 20% are required to bear this expense upfront, ultimately adding a substantial sum to the funds required as part of your deposit.
The Path to Savings: How It Works
For instance, if you’re buying a home for $800,000 and you only have a $40,000 deposit (5%), you would still need more funds to cover for the mandatory LMI premium – typically around $35,000. This LMI premium is to be paid upfront, therefore it may be added towards the borrowing amount (capitalised). However, at 95% LVR, this may be the highest ratio the lender can lend against that property, therefore ultimately you need another $35,000 of your own funds to pay for the LMI.
However, if your profession qualifies for the 95% LMI waiver, you can skip this entirely and go purchase that house with a true 5% deposit ($40,000) only. The reason behind this LMI waiver policy is relatively straightforward. Borrowers with a certain profession are deemed less risky by some lenders, which eliminates the insurance requirement by that lender.
Qualifying for LMI Waivers: Criteria to Consider
To qualify for these handy LMI waivers, the banks have put a several criterias to be met, such as:
- Providing proof of active membership in the relevant industry association, such as the Australian Medical Association (AMA) for medical professionals or CA, CPA, CFA, or FIAA for accountants.
- Holding an active Practising Certificate for legal professions.
- Proof of income generated through this profession, and there may be a minimum level of income (ie. $150,000 per annum income as a doctor).
- Either paid salary or self employment income can be accepted.
- Some professions may only receive LMI waiver up to loan-to-value ratio (LVR) 90%, but some professions may go as high as 95%.
Seizing the Opportunity: Taking Action
If you are currently working in one of these esteemed professions, consider reaching out to us to find your best lending option. As your trusted mortgage brokers at Navanti Finance, we offer obligation-free home loan consultations and we can also confirm if you are eligible to take advantage of these LMI waivers policy through our lenders.
If your profession unfortunately does not qualify, don’t worry – there’s still a solution. Some of our lenders are offering LMI-free lending to any professions for borrowings up to 85%. Feel free to contact us for more information.
Conclusion: Your Key to Financial Freedom
In a landscape where every dollar counts, leveraging your professional status to unlock benefits of buying a property with less deposit requirement and eliminating a significant lending cost is a prudent move. So, if you’re ready to embark on your homeownership journey without the weight of LMI dragging you down, reach out to us at Navanti Finance today and take the first step towards financial freedom.