Lenders mortgage insurance (LMI) is one of the most substantial charges connected with obtaining a house loan since it can quickly increase the costs of purchasing a home.
Aspiring homeowners can avoid this high-expense LMI and save significant money by merely being in a specific profession. Scroll down to learn if you qualify for a Lenders Mortgage Insurance Waiver.
What Is Lenders Mortgage Insurance?
Lenders require LMI when a home buyer’s borrowing exceeds 80% of the property value. It safeguards them against losses caused by borrowers defaulting on repayments and not being able to recover their funds even after selling the property.
Even while the lender will typically pass on the actual LMI cost to you, it is critical to note that LMI premiums only insure the lender and not you or any guarantor. This implies that only the lender can lodge a claim under the LMI.
Noteworthily, Lenders Mortgage Insurance is not the same as mortgage protection insurance. The latter is taken by borrowers when they begin their mortgage for coverage in case they cannot make the repayments.
What Is An LMI Waiver?
A lender’s Mortgage Insurance (LMI) is typically required when buying a property with less than a 20% down payment.
In certain high-demand and high-income occupations, lenders consider home buyers low-risk borrowers. As a result, they’re often willing to waive LMI fees based on the borrower’s employment status.
In general, lenders offer an LMI waiver to attract home loan borrowers who do not fall into the high-risk bracket and are most likely to repay their home loan.
If you qualify for waived LMI, you could save thousands on upfront costs and purchase your new home faster.
Who is Eligible for Waived LMI Fees?
While many Aussie lenders offer LMI waivers to certain professionals, they should have a good credit history and be able to prove their repayment capabilities.
If you work in one of the professions listed below, you may qualify for an LMI fee waiver.
1. Medical Professionals
For preferred medical professionals, they may be able to have LMI waived for home loans of up to $4.5 million at 100% of the property value. However, they should be members of a recognised and accepted industry organisation such as the Australian Medical Association (AMA).
Very recently, registered nurses and midwives meeting certain criteria may be able to access an LMI-waived home loan.
2. Legal Professionals
Legal practitioners must be members of a relevant industry organisation to be eligible for a waiver. You can qualify for LMI exemption if you are a solicitor, barrister, judge, or lawyer earning at least $150,000 yearly (or will shortly), including rental income.
Also, the maximum loan size allowed for legal professionals is $2 million, which should not exceed 90% of the property's purchase price.
3. Professional Athletes
If you're a professional athlete, you apply for an LMI waiver if you have an approved agent or an accredited manager. In addition, the maximum loan amount must not surpass $2 million or 90% of the property's value. Also, your annual income must not be less than $150,000.
4. Entertainment Professionals
If you're earning at least $150,000 annually and employed in fashion, film, theatre, television, and music can have LMI waived. Entertainment industry professionals qualify if, among others, their maximum loan limit is $2 million and 90% of the price of the property.
An accountant can avoid paying for LMI on loans up to $2 million and 90% of the property's value. However, membership with a relevant industry body is mandatory.
An actuary, finance manager, auditor, and chief financial officer earning $150,000 yearly (rental income included) are eligible.
6. Mining Specialists
Professionals such as geophysicists, quantity surveyors, geologists and mine surveyors are among Australia's highest-earning professions. They employed in the energy, resource and mining industries can have LMI waived.
Waivers apply to a maximum loan limit of up to $2 million, up to 90% of the property value. However, you must earn at least $150,000 each year.
7. First Home Buyers with First Home Guarantee
The scheme offers first home buyers borrowers waivers on LMI fees for as low as a 5% deposit.
8. Home Buyer With A Guarantor Loan
Home buyers entering the property market with guarantor loans can borrow 100% of the home’s purchase price and other related expenses. You may not have to pay LMI because an eligible family member will have offered their property security against your loan.
9. Investors In Defence Housing Australia (DHA)
Some lenders offer 90% waived LMI on investment loans when purchasing Defence Housing Australia property. Moreover, you do not have to work in a specific occupation to avoid paying LMI.
Why These Professions And Not Others?
Customers in these professions are mostly considered low-risk borrowers by lenders. This is because they have good borrowing power, show financial responsibility and rarely default on their monthly repayments.
If you're employed in the selected professions, our borrowing power calculator can help you estimate how much you can borrow without paying LMI.
Furthermore, high net-worth professionals frequently associate with other high earners in their industry. A favourable encounter with a lender may lead to a referral to another coworker.
Lenders gain from these eligible professionals because it allows them to expand their network of high-income, low-risk customers.
How Much Could You Save On LMI?
Notably, the LMI rates of the major banks and Australia's largest lenders can vary dramatically compared to smaller non-bank lenders.
Small lenders typically do not have mortgage insurers and instead self-insure by charging their risk fee. As a result, smaller lenders also consider significantly riskier home loan applications than the major banks.
Joust used the LMI calculator of a leading insurance provider in Australia to illustrate how LMI waivers can help you save money on home loans.
The Lenders Mortgage Insurance calculated on property values in the following table are for owner-occupier's home loans of first home buyers. The loan term is up to 30 years and does not include stamp duty. These values are relevant as of November 2022.
Consider Joust To Match You With A Suitable Lender
If you're eligible for waivers of LMI premiums, you can access competitive loans with more favourable terms and better interest rates.
The live auction tool on our marketplace can save you the hassle of shopping around with bids from reputed lenders that offer LMI waivers.
After reviewing the offers and their terms, you can choose one that fits your budget. The auction is conducted in a secure environment with complete transparency, and there's no obligation to accept any offer.
Note: The information in this article is general in nature and should not be considered personal or financial advice. You should always seek professional advice or assistance before making any financial decisions.