Lenders’ mortgage insurance, or LMI, is one of the biggest associated costs of a mortgage. But if you’re employed in a certain profession, you may be able to avoid paying for it.
LMI often gets a bad rap because of the huge cost it adds when buying a property. Add this to the fact that it solely protects the lender and it’s understandable why many borrowers want it waived.
However, lenders often require LMI if the amount being borrowed is more than 80% of the property’s value because it gives them a safety net just in case a borrower defaults on their loans.
But some borrowers can potentially save thousands for dollars just by being member of a certain profession. Here’s how some professionals can dodge the hefty cost that comes with LMI.
Medical professionals
Doctors can have LMI waived for loans of up to $4.5m at 100% of the property’s value as long as they’re members of an accepted industry organisation such as the Australian Medical Association (AMA). It also pays to be on the list of “preferred medical professionals,” – which includes surgeons, dentists, optometrists, pharmacists, chiropractors, and veterinarians.
Legal professionals
Legal professionals must be a member of a relevant organisation to qualify for an LMI waiver. These include solicitors, judges, barristers, and lawyers who are earning at least $150,000 annually or will be reaching this salary range soon, rental income included. The maximum loan limit should be $2m and this should not be over 90% of the property price.
Accountants
Just like legal professionals, accountants can avoid paying for LMI for loans not exceeding $2m and 90% of the property’s worth. But they must hold membership in a relevant industry body. Actuaries, auditors, financial managers, chief financial officers, and accountants must also have a yearly income of $150,000 or higher, with rental income also be being considered.
Mining specialists
Professionals in the resource, energy and mining industries, including geophysicists, geologists, quantity surveyors, and mine surveyors, can waive the LMI for loans amounting to $2m at up to 90% of the property’s value. But they should be earning at least $150,000 in yearly income.
Professional athletes
Professional athletes should have an accredited agent or manager to qualify for an LMI waiver. Loans should not exceed $2m and 90% of the property’s worth. Annual income should also not be below $150,000.
Entertainment industry professionals
Professionals working in the fashion, theatre, film, television, and music industries who are earning at least $150,000 every year can have the LMI waived as long as the maximum loan amount is not over $2m and 90% of the property price.
It is also important to note that meeting the above-mentioned requirements does not automatically qualify a borrower for an LMI waiver. A clean credit history is also necessary, no matter what the profession is.
Why do some professionals qualify for waivers while others do not?
Lenders consider people in the listed professions as low-risk borrowers because of they are high-income earners. These professionals can afford to borrow large sums of money, historically make payments on time, and rarely default on their payments.
Additionally, these high-net-worth workers often belong in a circle of other high earners in their fields. A positive experience with a lender can result in a recommendation to another co-worker. This benefits lenders as it allows them to pad their network of low-risk and high pay-off customers.
But what if you’re not a doctor, lawyer, or accountant?
Not belonging to these high-earning professions does not necessarily mean a borrower has to pay LMI. There are still ways to avoid it.
The best way dodge paying for LMI is to save enough for a 20% deposit. This amount might be bigger than the actual LMI cost but if a borrower has already been saving and is close to the target amount, the LMI should not be a concern.
Another way is to get a guarantor. They can be the borrower’s parents or guardians but since they will be securing their homes against the borrower’s loan, it is crucial for the borrower to stay on top of their repayments.
First-home buyers can also apply for the First Home Loan Deposit Scheme (FHLDS), which grants eligible borrowers a special government guarantee that waives LMI fees for as low as 5% deposit.
