If you can qualify for no LMI, you avoid one of the biggest associated costs of a mortgage. Find out if you may be able to get a waived LMI loan.
What Types of Borrowers Qualify for Waived LMI?
Different groups of lenders can get a no LMI loan. If you fall into any of these groups, it may be worth finding a lender that is known for waiving LMI if certain criteria are met, or to talk to a mortgage broker about your chances of qualifying. If you do qualify, you’ll save thousands of dollars.
- Certain high-earning professionals
- Borrowers with a guarantee security
- 85% loan and perfect credit
Doctors and Waived LMI
If you are a medical doctor, you may be eligible for a home loan with no LMI. You’ll still have to have a good credit history but if you are a qualified practitioner, you don’t want to miss out on special discounts that can help you save.
Why do mortgage providers offer such an appealing privilege to doctors?
Statistically, medical practitioners are not likely to default on a mortgage. They also typically have a high-income. These two attributes make them less of a risk to lenders. That’s why the banks are willing to waive LMI for doctors even when borrowing more than 80% of the Loan to Value Ratio (LVR). In fact, some lenders will approve loans for up to 100% of the property value with no LMI.
Here are the criteria for no LMI home loans for doctors:
- You must be a member of an accepted medical professional organisation such as the Australian Medical Association
- Your profession must be on the list of preferred medical professionals, which includes dentists, surgeons, doctors, and pharmacists.
- The maximum loan size is $4.5 million
All doctors won’t get a free pass with Lender’s Mortgage Insurance. You’ll also have to meet other criteria such as having a clean credit history and not carrying a lot of personal debt.
What Other Professionals Can Qualify?
If you work as a professional in an industry that is known for high income earnings, it’s possible you’ll be able to qualify for waived LMI when you apply for a loan for 90% of the property value or less.
For professional no LMI loans, lenders will have minimum income requirements, usually an annual income above $150,000. You can borrow up to $2 million without having to pay LMI. You’ll also need to be a member of a relevant industry organisation.
The following professionals are often considered for waived LMI with a 90% LVR loan:
- Legal professionals: judges, lawyers, barristers, solicitors
- Mining, energy and resource specialists: geologist, geophysicist, mine surveyor, quantity surveyor
- Some professional athletes and professionals in the entertainment industry
If you are a high earning professional, call us on (07) 3146 5732 or fill out our online enquiry form.
Guarantor Loans and Waived LMI
Because your guarantor is offering their assets as an extra security guarantee, you won’t have to pay any Lender’s Mortgage Insurance. It doesn’t matter what field you work in, nor do you have to have a deposit. With guarantor loans, you may be able to borrow more than 100% of the Loan to Value Ratio.
Banks will expect your guarantor to be a close family member, usually a parent. Also, as they will be liable for the guaranteed amount, your parents will have to take on a fair degree of risk. But, this can be a great option for first-time homebuyers as you’ll be able to save thousands without having to pay LMI.
Will Lenders Waive LMI if You Have Flawless Credit?
With a clean credit history and a high income, there are lenders that will waive LMI if you are borrowing up to 85% LVR. You don’t have to be a professional but it is important to ask about waiving the cost. Some lenders won’t necessarily let you know about all the possible discounts you may qualify for if you don’t ask.
This type of loan is only available in Australia’s major cities. You can usually borrow up to $1 million.
How Much Does LMI Cost?
Even if you don’t fit into any of these borrower categories, you can still avoid paying LMI if you have a large enough deposit. Generally, lenders will waive LMI if you are borrowing 80% of LVR or less. So, if you’ve managed to save enough for a 20% deposit and to cover your purchasing costs, you can qualify for a no LMI loan and save thousands.
How much does LMI cost? Is it worth it to save a larger deposit so you can avoid paying it?
Your LMI premium will vary based on several factors, including:
- The size of the deposit
- Value of the property
- The term of your mortgage
- Whether it’s an owner-occupier or investment loan
- Whether you have savings
- If you are a first-time home buyer
Also, your lender and the insurer they use for LMI will influence the price. As an estimate, you can expect to pay between 2% to 4% of the loan. You can use an LMI calculator to get a clearer estimate based on your expected loan.
This means, you could easily end up paying well over $10,000 in LMI, especially if you have a small deposit in relation to the purchase price. For example, with a $500,000 property and a 10% deposit, LMI would be around $8k. With a 5% deposit, LMI would cost around $16k.
What about LMI Discounts?
If you get a loan through certain lenders, you may be able to get an LMI discount as a first-time time homebuyer. Some mortgage providers have pre-negotiated an 8% to 15% discount on LMI premiums for first-time home buyers.
You’ll have to meet certain criteria, such as loan size and demonstrating a genuine savings.
Why Do Banks Waive LMI for Some Professionals and Not Others?
Waived LMI isn’t because banks are partial to some professionals. It’s that they are partial to the low risk that professional borrowers present. Banks know from historical data that the professionals on their preferred lists tend to make payments on time and rarely default. They also borrow high amounts because they can afford to. This is exactly the type of borrower banks want to attract.
If lenders can include lots of low-risk professionals on their list of current mortgage customers, that’s a good thing! Remember, banks don’t gain when you pay LMI – the insurer gets your LMI premium, not the lender. All your lender wants is to reduce their risk so they are less likely to incur any losses.
Another advantage for lenders is that high net worth professionals tend to be connected to others in the same professional fields. If one borrower has a good experience with the bank, they may refer it to another professional, which means there’s a good potential for more low-risk, high pay-off customers.
What Steps Can You Take to Lower Your LMI Premium?
If you aren’t a doctor or a lawyer and will have to pay LMI, there are ways you can lower your LMI premium amount.
- Lower your Loan to Value Ratio (LVR) and your loan amount by saving a larger deposit
- Make sure you can demonstrate that you have a genuine savings – money you have been depositing in your savings account over a period of time
- If you qualify for a guarantor loan, your lender will waive LMI
Which lender and mortgage insurer you choose will also impact your LMI costs. Call us on (07) 3146 5732 and talk to one of our mortgage specialists about what you can expect in LMI from different lenders and the insurance providers they use.
How to Apply for a No LMI Loan
Ready to apply for a home loan and believe you may be able to avoid LMI? Don’t think you have to settle for a lender who doesn’t offer to waive LMI upfront if you are a blue chip borrower. You can ask to have LMI waived. Or, fill out our online enquiry form, or call us on (07) 3146 5732. We can assess your situation and help you get a no LMI loan, if it’s possible for you to qualify.