Borrow more with less: what is an LMI waiver and do you qualify?
Saving enough deposit for a new home can be challenging. But if you’re in a certain group of professionals, like doctors or lawyers, you may be able to borrow more than others — for less.
With property sales hitting a 17-year high at the end of August, the competition is fierce and you need to have your finances in order before applying for a home loan. For most buyers, this means having a loan-to-value (LVR) ratio of at least 80%. If your LVR is higher than 80%, you may be required to make a one-off payment for Lender’s Mortgage Insurance (LMI).
Yet for some professionals, it’s possible to get LMI waived completely. Learn more about the waiver here and discover if you qualify.
What is Lender’s Mortgage Insurance (LMI)?
LMI is an insurance policy that protects the lender in case a borrower cannot afford to make their repayments. This one-off cost is paid upon the settlement of the property, with the costs varying depending on the type and size of the loan, LVR, and borrower’s employment status.
LMI providers also conduct background checks to ensure that a buyer can afford to take on the financial responsibility of repaying a mortgage.
What is an LMI waiver?
Almost all borrowers will be required to pay LMI if the LVR is higher than 80%. However, there are some exceptions to this rule.
Banks are typically willing to lend more money to high-earning and in-demand professions, such as doctors, solicitors, and accountants. This cohort of borrowers is perceived as low-risk due to their high income. Lenders believe they are able to afford to borrow large sums of money and make their payments on time, even if they have an LVR ratio above 80%.
Historical data also shows that these professional niches have good credit habits and are likely to borrow more, which makes them desirable customers for any lender.
Who qualifies for an LMI waiver?
The list of professions that qualify for waived LMI varies between different lenders. However, if you’re in one of these fields, you will most likely be able to find a way to access the waiver:
- Medical professionals: Doctors, dentists, vets, pharmacists, optometrists and even chiropractors can often borrow 95% of the property value with a minimal deposit. Professionals in these fields can have LMI waived for loans up to $4.5 million, provided they are a member of an accepted industry organisation.
- Lawyers, solicitors, and other legal professionals: If you’re a member of a professional industry organisation, you may be able to qualify for an LMI waiver. However, you’ll need to meet minimum income requirements of $150,000 per year with some lenders like CBA before you can take out a loan. In most cases, legal professionals can borrow up to $2 million with an LVR ratio under 90% without needing to pay LMI.
- Accounting professionals: Accountants, actuaries, auditors, financial managers, and CFOs may also qualify for an LMI waiver, provided they are members of a relevant industry body or hold a CPA or CA membership. Like lawyers, accounting professionals can borrow up to $2 million with an LVR up to 90% — provided they meet minimum salary requirements of $150,000 per year.
Some lenders may also offer LMI waivers for applicants outside these professions on a case-by-case basis. The LVR can be anywhere from 85 to 90% of the total price of the property.
Investors can also qualify if they’re purchasing a Defence Housing Australia (DHA) property, regardless of their profession or income. These properties have a guaranteed rental income with low management fees, which makes them ideal for lenders. This is a niche product, with only a handful of lenders offering LMI waivers for DHA properties across Australia.
Not sure if you qualify for an LMI waiver?
Whether you’re uncertain if you’re eligible for an LMI waiver or just want to secure the sharpest home loan rate possible, we’re here to help. Rateseeker brokers have successfully assisted borrowers from all industries to purchase their dream home — and we can do the same for you.
** General Advice Warning
The information provided on this website is general in nature only and it does not take into account your personal needs or circumstances into consideration. Before acting on any advice, you should consider whether the information is appropriate to your needs and where appropriate, seek professional advice in relation to legal, financial, taxation, mortgage or other advice.