If you don’t have a six-figure deposit saved or a decent chunk of equity in your existing home loan, there’s a good chance you’ll need to pay lender’s mortgage insurance (LMI).
Unless you work in an industry that qualifies for an LMI waiver, that is.
What’s an LMI waiver? It’s a financial win that could see you own your own home (or refinance your existing loan) without having to pay this insurance premium.
Essentially, your lender gives you an exemption from paying LMI because they recognise that you work in a safe, secure and high-paying industry that is likely to keep you in reliable employment for many years to come.
This has become even more important following the pandemic, as these industries are almost considered “recession-proof”.
So which professions qualify for reduced or waived LMI?
Lender’s mortgage insurance is an expense a lot of borrowers have to pay when they take out a home loan. It applies to any loan when your deposit is less than 20% and it acts as a guarantee to the lender that they’ll still get paid, even if you stop repaying your home loan.
LMI cops a lot of flack because it’s so expensive, but the reality is, without LMI, many home buyers would be waiting years (or even decades) to save enough of a deposit to enter the property market.
For instance, if you’re buying a home for $800,000 and you have an $80,000 deposit, you have a 10% deposit and will be required to pay LMI – a premium that can range from a few thousand dollars to $25,000+. This amount can be paid upfront, or you may be able to add it to your loan to pay it off over time.
The main professions that may qualify for an LMI waiver include:
- Doctors and medical professionals
- Accountants and actuaries
- Mining executives and experts
- Lawyers, barristers and conveyancers
- Professional athletes and entertainment professional
How much money could you save with an LMI waiver?
If you meet the criteria and you don’t have to pay LMI, it means you stand to save thousands of dollars – potentially even tens of thousands, depending on the size and type of loan.
To qualify, you generally need to meet the following criteria:
- Membership of a relevant industry organisation, such as the Australian Medical Association (AMA) if you’re a medical professional.
- Professional athletes and entertainment professionals may need to have an accredited manager or agent.
- A maximum loan to value ratio may apply, generally 90%.
- Minimum income levels may apply, such as $150,000 per year.
If you’re not employed in one of these industries, you may still be able to avoid paying LMI if you’re a first homebuyer and you qualify for the First Home Loan Deposit Scheme (FHLDS). This allows you to buy a home with just a 5% deposit, without needing to pay LMI.
You may also be able to avoid paying LMI if you’re refinancing your loan and your home has grown in value or you have paid LMI previously and the lender you are moving to uses the same insurer.
To find out if you qualify for an LMI waiver on your new home loan or refinance, contact us today.Speak to an expert broker