LMI waiver for professionals
Doctors, lawyers and engineers, rejoice! LMI waivers are on offer for you and others employed in highly-qualified professionals, saving you thousands of dollars.
Key takeaways
- Borrowers taking out low-deposit home loans get hit with lenders mortgage insurance (LMI) premiums.
- Lenders may waive LMI for highly-qualified professionals, such as doctors, lawyers, accountants and engineers.
- Check with a lender before applying to see if you qualify for an LMI waiver – it could save you tens of thousands of dollars.
Who is eligible for a LMI waiver?
If you have specialised qualifications in a high-demand field, plus a relatively high income, lenders view you as a low-risk applicant. This can mean better lending terms and if you don't have a standard 20% deposit, you can save you thousands in LMI costs if you're eligible for an LMI waiver. To be eligible, you must:
- Be currently employed and practicing your occupation - retirees and students are not eligible.
- Hold relevant credentials and memberships, ie a lawyer must hold their practising certificate in an Australian state or territory; a doctor must be a member of their industry's peak body or authority, such as the Australian Medical Association.
- Earn an amount that exceeds the minimum income requirement (this varies between lenders; usually at least $90,000, and often it's 6-figures)).
For example: You decide to buy a home.
- You're a lawyer with an income of $250,000, and you have saved up to $100,000, which is a 10% deposit on the $1 million home you're looking to buy.
- Your lender approves the loan, you says you will need to pay $22,000 in LMI premiums as a low-deposit borrower.
- You point out that you're a lawyer with a very high income, but the lender won't budge.
- Then you approach another lender and mention your profession. The new lender says they'll happily waive LMI based on your profession and income.
- And just like that, you've saved yourself more than $20,000.
- Which occupations are exempt from LMI?
The following professions are generally eligible for an LMI waiver:
- Lawyers, conveyancers and barristers
- Doctors and surgeons
- Other medical staff (can be dependent on lender)
- Veterinarians
- Accountants and actuaries
- Dentists
- Engineers
- Financial planners
Our expert says: Why I don't mind paying LMI
"I've paid LMI three times, and I have no regrets – because each time I paid it, I didn't have a 20% deposit, so I wouldn't have been able to buy without it. The growth in value during that 'time in market' is often way more than what you pay in LMI premiums. LMI is expensive and of course it's great if you can avoid it. But I'd prefer to pay LMI and get into the market – and enjoy the growth in my property's value over time – rather than to wait until I've saved a big enough deposit. "
How much can professionals save in waived LMI premiums?
| Deposit size | Deposit (%) | Property value | LMI premium |
|---|---|---|---|
| $25,000 | 5% | $500,000 | $15,888 |
| $50,000 | 10% | $500,000 | $8,428 |
| $37,500 | 5% | $750,000 | $32,867 |
| $75,000 | 10% | $750,000 | $15,977 |
| $50,000 | 5% | $1,000,000 | $43,728 |
| $100,000 | 10% | $1,000,000 | $22,644 |
All the results above are estimates for a 30-year loan term, with deposit of 5-10%. These figures are estimates only, taken from Finder's LMI premium estimate calculator.
Which banks waive LMI for professionals?
Many banks and lenders offer LMI waivers, including Big 4 banks Westpac and ANZ and a number of other lenders, including Auswide, Bank of Melbourne and St.George. CBA offer LMI waivers for professionals under their CBA Medico Plus Policy, which offers waivers for loans worth up to 94.99%.
Westpac also offers an LMI waiver to eligible registered nurses and midwives with a 10% deposit, if they earn over $90,000 per annum.
How to avoid LMI without 20% deposit
What about those of us who aren’t doctors, lawyers or engineers earning a high income? Fortunately, there are other ways to avoid LMI and no matter what your occupation is, you could save on your home loan and LMI by doing the following:
- Applying for the First Home Guarantee. If you're eligible, the First Home Guarantee lets you buy a home with a 5% deposit and avoid LMI, thanks to government support.
- Getting a guarantor. Getting a guarantor lets you qualify for a loan with a deposit below 20% and avoid LMI. By using their property as security, the guarantor minimises the risk to the lender.
- Borrowing smaller amounts. Borrowing less means your LVR will be smaller, and therefore your LMI bill will be smaller or non-existent.
- Saving a bigger deposit. This is easier said than done, of course! But here are some deposit saving tips to help.
- Borrowing from family. While most lenders require at least 5-10% in genuine savings for your deposit, if your family can give you more in the guise of a gift, you might be able to avoid LMI because your deposit is larger.
Sources
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