Certain groups of buyers in Australia can access the LMI waiver for professionals.
If you fall into one of these professional groups, you’ll want to find out how you can have lenders mortgage insurance waived – especially since LMI is one of the most significant mortgage expenses.
If you’re employed within the legal industry, medical field, finance or even in the sporting and entertainment industry, you may be able to waive LMI entirely.
But First, What Is Lenders Mortgage Insurance?
Depending on how much of a deposit you’re able to pay towards your home loan, you may end up having to pay lenders mortgage insurance (LMI).
Lenders mortgage insurance is an insurance policy you may have to take out on your home loan to protect the lender in instances where you may not be able to meet your home loan obligations, such as defaulting on your loan.
Lenders generally require homebuyers to take out an LMI policy where their deposit is less than 20%. In other words, they are taking out a loan for more than 80% of the cost of the property.
Each lender’s terms and conditions differ, but generally LMI cost is capitalised onto your home loan – where you’ll also be charged interest.
However, if you’re an individual that meets certain criterias for LMI waiver for professionals, you can avoid lenders mortgage insurance altogether.
What Should You Know About the LMI Waiver for Professionals?
Some lenders and banking institutions offer an LMI waiver for professionals.
The notion behind an LMI waiver for professionals is that lenders and banks typically consider professionals low-risk borrowers because:
- they are generally high income-earning individuals; and
- their incomes are usually stable, so they represent a low risk for defaulting on their loans.
Each lender offers LMI waivers to its own approved list of professionals. However, you can generally expect that lenders will waive the LMI for accredited professionals in the following industries:
- Legal – judges, barristers, legal advisors and solicitors;
- Medical – doctors, surgeons, dentists, vets and pharmacists;
- Mining Specialists – geologists, quantity surveyors, mine surveyors and geophysicists;
- Professional athletes – rugby players, cricket players, athletes and football players;
- Accounting and finance – actuaries, auditors, financial managers, CFOs and accountants; and
- Entertainment industry professionals – musicians, theatre actors, TV actors and film actors.
What Are the LMI Waiver Eligibility Requirements?
Different lenders offer different LMI waiver policies for different professional individuals. But here are a few examples of what you can expect in each profession.
Medical professionals will typically be required to be a member of the Australian Medical Association (or of similar) and offer a preferred service such as (but not limited to) a:
- General Practitioner;
- Surgeon; and
- a Pharmacist.
Legal professionals will typically be required to be a member of a relevant organisation such as the Law Society of New South Wales and offer a preferred service such as:
- Barristers; and
Most lending institutions will allow legal professionals to take out a home loan for 90% of the value and then add a limit to the loan size.
For example, a lending institution may allow a barrister to take out a mortgage for 90% of the value at a maximum value of $2 million.
Depending on the lender, some may have a minimum income requirement to meet this benefit, while some don’t.
Remember, each bank and lending institution will have its own lending requirements, so it’s worth consulting with a mortgage broker to see which institutions will accept your salary earnings as eligible for the LMI waiver.
Accountants, Legal Professionals and Mining Specialists are typically required to meet similar qualifying criteria.
To qualify for the LMI waiver for professionals, athletes will have to be part of a professional team. For example, rugby league players need to be part of the National Rugby League, and Aussie rules players will need to be a member of the Australian Football league.
The rest of the requirements, such as the maximum value of the loan and minimum earnings, will be similar to the criteria mentioned earlier.
Can I Avoid Paying LMI If I Don’t Qualify For a Professional’s Waiver?
Not qualifying for the LMI waiver for professionals doesn’t mean you’ll end up paying LMI. There are various ways you can avoid paying LMI, including:
- saving up for a 20% deposit;
- the First Home Loan Deposit Scheme – which is a government incentive that allows eligible borrows to waive LMI with a deposit as a small as 5%; and
- guarantor loans – where someone acts as a guarantee to your home loan.
- Some Lenders at times have LMI waivers for non professionals as a special offer for First Home Buyers.
Lending institutions will typically require borrowers to take out lenders mortgage insurance where they can’t provide a deposit of at least 20% deposit. These borrowers are considered a higher risk, and the purpose of LMI is to protect the lender should the borrower default on their payments.
However, should you fall into the eligible categories of professionals, you’ll be deemed less of a risk and can avoid paying LMI altogether.
LMI is a significant mortgage expense, so if you can avoid it, you should. But if property prices are constantly increasing, then paying LMI might be viable if the growth in property prices outweigh the cost in the short term.
Each institution will have its own eligibility requirements when it comes to the LMI waiver for professionals, so it’s worth consulting with a mortgage broker to see where you can qualify.
At The Mortgage Agency, our mission is to help you achieve your goals and guide you in every step of the property buying journey by implementing a solid home loan plan.
We seek to understand our customers and provide them with a solid grasp of home loan fundamentals.
If you would like to see if you qualify for the LMI waiver for professionals, book a consultation with one of our expert mortgage brokers today.