Waived Lender’s Mortgage Insurance

Whether for your next home or investment property, buying a new home is always an exciting process. However, if you are borrowing more than 80% of your desired property’s value, you may find that certain banks and lenders are going to require that you pay for a Lender’s Mortgage Insurance or LMI. If you know how LMI works, borrowing with a low deposit shouldn’t be a major cause for concern, as you are aware that there are a few ways by which LMI can be waived.

But if you are new to this topic, your trusted mortgage broker should be able to explain thoroughly what LMI is and how it can affect your lending experience considering your scenario.

Lenders’ Mortgage Insurance, or LMI, is an insurance policy designed to protect the lender. It is not insurance for the borrower. Normally, it is a one-off payment made by the borrower at the time of getting the loan settlement. The LMI will cover the lender from certain risks that could potentially come from letting you borrow more than 80% of your desired property’s value. To achieve this, the LMI will give your lender the ability to repossess your property if you default on mortgage payments.

Between you and the lender, there will be a third party, the LMI provider. The lender decides on who the LMI provider is going to be.

While LMI is usually encountered by young homebuyers who have insufficient savings for their required deposit, it is a common topic amongst many borrowers regardless of age, gender, marital status, business, or occupation.

Your builder, architect, council, surveyors, and other contractors are all a part of your new home construction. As such, for the approval of a construction home loan, you may be required to provide additional documentation. Further terms and conditions may also apply if you are an owner-builder.

Lenders will give the following categories of borrowers the option of proceeding with a home loan without an LMI.

1. Borrowers with guarantors usually parents, guardians, and siblings
2. First home buyers whom the government has granted under the First Home Loan Deposit Scheme, a guarantee to waive LMI for as low as 5% deposit
3. Professionals and those meeting specific work profiles
4. Investors in DHA properties

Lenders deem professionals as low-risk borrowers since they are highly in-demand across different industries and locations and, typically, highly paid. Statistics also show that these borrowers rarely default on their payments and loans. Another reason why they are preferred is that their circle is likely to include other professionals, which could be potential borrowers for lenders. Their circle could extend to larger networks like associations, national governing agencies, or licensing bodies.

So even with a deposit of less than 20%, lenders still view them as borrowers that can afford to make large payments on time.

While different types of professions qualify for waived LMI, they each have their own set of requirements that they need to abide by. The following list covers all the listed professionals and some of the average requirements that need to be in place to waive the LMI payment.

Doctors, Accountants, Lawyers, Mining Specialists, Professional Athletes

• Maximum home loan of $4.5 million.
• Maximum percentage of property borrowed is 100%
• Must be a member of industry organisations/associations.
• Must be a preferred medical professional

Entertainment Professionals

• Maximum home loan of $2.0 million.
• Maximum percentage of property borrowed is 90%
• Must be a member of industry organisations/associations.
• Must have an income of over $150,000 per year, including income from rental properties

First home buyers may also qualify for an LMI waiver if they have first qualified for the First Home Loan Deposit Scheme.

The First Home Loan Deposit scheme is a nationwide scheme designed to assist first home buyers with entering the housing market sooner. As part of the scheme, homeowners can purchase a home with a deposit that is as low as 5%. They are also able to waive the Lenders Mortgage Insurance, making homeownership even more attainable in that way.

If you are looking to get the best home loan deal available to you while waiving the LMI associated with it, you will need an expert mortgage broker that has experience in this specific financing scheme. Contact Lendstreet today.