If you’re a doctor you could get a lower interest rate and LMI waived with your home loan.
Before lending money to any borrower, every financial institution will consider a loan applicant’s financial history and credit record to determine their ability to repay the loan amount.
Due to your recognised profession and status, most lenders view doctors as low-risk borrowers that also have a high earning potential.
As a result of this, some lenders offer specialist home loans for doctors and offer a range of attractive discounts, including discounted fees, better interest rates, higher loan-to-value ratios (LVRs) and the ability to avoid lenders’ mortgage insurance (LMI) payments altogether.
How do home loans for doctors work?
These types of loans can be used to buy your first home or your next home, to refinance, to buy an investment property or to build a new home. However, while they’re set up in much the same way as regular loans, if you’re a doctor you can get a home loan with a range of attractive benefits and features to reflect the fact that you’re considered a low-risk borrower.
For example, some lenders will allow you to borrow up to 90% of the value they plan to purchase (and sometimes more) without having to take out lenders’ mortgage insurance. Under a regular home loan, however, this type of insurance is usually compulsory if you need to borrow more than 80% LVR. Some lenders will even lend you 100% if you’re an owner occupier, but note that you’ll need to pay LMI if you borrow this much.
Other potential benefits of home loans for doctors include discounted interest rates and waived loan fees.
Dr Dave’s Home Loan
Dave is a surgeon who earns $110,000 per year. He’d like to buy himself an inner-city apartment priced at $1 million, but he’s only got $100,000 saved for a deposit. When he approaches his ‘big four’ bank for a loan, he’s dismayed to discover that they require him to fork out several thousands of dollars for lenders’ mortgage insurance before they will approve him for a loan.
Looking elsewhere, he discovers a lender that offers home loans for doctors. This lender is happy to waive his lenders’ mortgage insurance payment even though he needs to borrow 90% LVR, plus they also offer a lower interest rate than his bank. As a result, Dave is set to save approximately $20,000 in LMI costs.
How much could I save on LMI?
The amount of LMI you could save with one of these loans can differ depending on whether or not you’re a first home buyer, where you’re buying and more. Here are some indicative figures using Genworth’s LMI Premium Estimator for a first home buyer with a 30 year loan.
| Deposit size | LVR | Property value | LMI charge |
|---|---|---|---|
| $25,000 | 95% | $500,000 | $15,722 |
| $50,000 | 90% | $500,000 | $7,920 |
| $50,000 | 95% | $1,000,000 | $42,275 |
| $100,000 | 90% | $1,000,000 | $20,070 |
| $75,000 | 95% | $1,500,000 | $69,682 |
| $150,000 | 90% | $1,500,000 | $33,480 |
How to compare home loans for doctors
Consider the following features when comparing specialist home loans for you.
- Interest rates. The interest rate is an important consideration for any home loan, so compare the rates offered by different providers and check whether or not any discount applies.
- Fees. Ensure you understand all the fees associated with the home loan before you sign on the dotted line.
- LVR. How much of the value of the property are you allowed to purchase? This varies between lenders, though home loans for doctors typically offer higher LVRs of as much as 100% if you’re an owner occupier.
- Lenders’ mortgage insurance (LMI). One of the most attractive features of home loans for doctors is that you are allowed to borrow up to 90% LVR (or more in some cases) without being required to pay LMI.
- Other features. Consider features such as your repayment options, whether you can make extra repayments without penalty, and whether the loan offers benefits such as a redraw facility and offset account.
What you should weigh up before seeking one of these loans
Pros
- No LMI for certain LVRs. Home loans for doctors regularly waive the need for applicants to take out this type of cover when borrowing up to 90%.
- Discounted interest rates. Home loans for doctors also feature better interest rates than you may find on regular home loans.
- Available for a wide range of medical professionals. Home loans for doctors are available for everyone from cardiologists and anaesthetists to plastic surgeons and psychiatrists. Ask your lender about the professions that qualify for their specialist home loans.
Cons
- Not offered by all lenders. Home loans specially designed for doctors are not available from all financial institutions.
Who offers home loans for doctors?
Lenders:
- BOQ Specialist
- Commonwealth Bank
- Westpac
- ANZ
Brokers:
- Home Loan Experts
- Shape Home Loans
- Oak Laurel
