Waive LMI
When buying a home, many Australians face the challenge of saving up a substantial deposit. Typically, lenders require a minimum deposit of 20% to avoid paying Lenders Mortgage Insurance (LMI). However, for certain professionals, there’s a way to bypass this costly insurance premium even with a smaller deposit. This is where LMI waivers come into play.
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What is Lenders Mortgage Insurance (LMI)?
Lenders Mortgage Insurance is a one-time premium that borrowers are required to pay when their deposit is less than 20% of the property value. This insurance protects the lender in case the borrower defaults on their home loan, and the property sale doesn’t cover the outstanding loan balance.
LMI can add thousands of dollars to your upfront costs, making it harder for many Australians to enter the property market. For example, on a $600,000 home loan with a 10% deposit, LMI can cost around $15,000.
How Can an LMI Waiver Help You?
An LMI waiver allows eligible professionals to secure a home loan with a deposit as low as 10% without paying the LMI premium. This can result in significant savings and help you purchase your dream home sooner.
Imagine you’re a doctor looking to buy a $800,000 property with a 10% deposit. Without an LMI waiver, you’d need to pay an LMI premium of approximately $28,000. However, if you qualify for the waiver, you can save this entire amount and put it towards your deposit or other costs associated with buying a home.
Who is Eligible for an LMI Waiver?
LMI waivers are typically offered to professionals in specific industries who are considered lower risk by lenders. These include:
- Medical professionals (doctors, dentists, veterinarians, optometrists, etc.)
- Accountants (CPAs, chartered accountants, etc.)
- Lawyers and solicitors
- Mining professionals (engineers, geologists, etc.)
- Professional athletes
- Entertainment professionals (actors, musicians, etc.)
To qualify, you generally need to provide evidence of your profession, such as a membership with a recognized industry body or a minimum income threshold.
How to Apply for an LMI Waiver
If you think you might be eligible for an LMI waiver, the first step is to speak with a mortgage broker or lender who specializes in these products. They can assess your situation and guide you through the application process.
When applying, you’ll typically need to provide:
- Evidence of your profession (e.g., industry membership, qualifications)
- Proof of income (payslips, tax returns)
- Identification documents
- Details of the property you wish to purchase
Your broker or lender will then assess your application and let you know if you qualify for the LMI waiver.
Other Ways to Reduce or Avoid LMI
If you don’t qualify for an LMI waiver, there are other ways to reduce or avoid paying this cost:
- Save a larger deposit: The most straightforward way to avoid LMI is to save a 20% deposit. While this may take longer, it can save you thousands in the long run.
- Get a guarantor: If you have a family member who owns property, they may be able to act as a guarantor on your loan. This can help you secure a loan with a smaller deposit without paying LMI.
- Take advantage of government schemes: First home buyers may be eligible for government initiatives like the First Home Loan Deposit Scheme, which allows you to purchase a home with as little as a 5% deposit without paying LMI.
LMI waivers can be a game-changer for professionals looking to enter the property market sooner. By saving thousands on LMI premiums, you can put more money towards your deposit or other costs associated with buying a home.
If you think you might be eligible, speak with a mortgage broker or lender who specializes in LMI waivers. They can help you navigate the application process and find the right home loan for your needs.
Remember, even if you don’t qualify for a waiver, there are other ways to reduce or avoid paying LMI. With the right strategy and guidance, you can make your homeownership dreams a reality sooner than you might think.
Frequently Asked Questions (FAQs)
An LMI waiver allows eligible professionals to secure a home loan with a deposit as low as 10% without paying the Lenders Mortgage Insurance (LMI) premium, potentially saving thousands of dollars in upfront costs.
LMI waivers are typically offered to professionals in specific industries considered lower risk by lenders, such as medical professionals, accountants, lawyers, mining professionals, professional athletes, and entertainment professionals. Eligibility usually requires evidence of profession and meeting minimum income thresholds.
To apply for an LMI waiver, speak with a mortgage broker or lender specializing in these products. They will assess your situation and guide you through the application process, which typically requires providing evidence of your profession, proof of income, identification documents, and details of the property you wish to purchase.
The main benefit of an LMI waiver is saving thousands of dollars on the LMI premium when buying a home with a deposit less than 20%. This can help you purchase your dream home sooner and put more money towards your deposit or other costs associated with buying a property.
Lenders Mortgage Insurance (LMI) is a one-time premium paid by borrowers with a deposit less than 20% to protect the lender in case of default. An LMI waiver allows eligible professionals to avoid paying this premium even with a smaller deposit, saving them significant upfront costs.
Yes, eligible professionals can apply for an LMI waiver with a deposit as low as 10% of the property value, depending on the lender and the specific product. This can make it easier to enter the property market without saving a full 20% deposit.
No, LMI waivers are not available for all professions. They are typically offered to specific industries considered lower risk by lenders, such as medical professionals, accountants, lawyers, and mining professionals. Eligibility criteria vary between lenders and products, so it's best to speak with a mortgage broker or lender specializing in LMI waivers to assess your situation.
