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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.
Certain borrowers are seen as lower risk by lenders, and are afforded special consideration. If you're a doctor, dentist, account, lawyer or other highly-paid professional, you could save thousands on your home loan.
Some lenders offer specialist home loans for professionals with 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.
Chat to a broker about mortgage options for doctors
These types of loans can be used to buy your first home or your next home, to switch from your current mortgage to a better one, to purchase 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 highly-paid professional 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 professionals include discounted interest rates and waived loan fees.
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.
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 | $15,960 |
$50,000 | 90% | $500,000 | $8,640 |
$50,000 | 95% | $1,000,000 | $42,845 |
$100,000 | 90% | $1,000,000 | $22,050 |
$75,000 | 95% | $1,500,000 | $71,108 |
$150,000 | 90% | $1,500,000 | $36,315 |
Consider the following features when comparing specialist home loans for you.
Meet Donna. Donna works as a dentist and earns $100,000 per year. Although she only has $100,000 in her savings account, Donna has decided she’d like to buy her first house for $1 million. Her bank is happy to offer her a loan at the standard variable rate, but they insist on charging her for the cost of LMI.
Having heard from a work colleague that there are specialist home loans for dentists available, Donna approaches a mortgage broker who tracks down the perfect loan for her. Donna will pay off her mortgage over a 30 year period. Although Donna needs to borrow 90% LVR, the new lender does not require her to pay LMI. This will save Donna a total of $20 070, or $154 per month if the premium is capitalised into the loan.
In addition, the lender also offers Donna a 0.25% p.a. discount of the standard variable rate, which in turn equates to high interest savings over the 20-year term of her loan.
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