What you should know about LMI waiver for professionals

When calculating your upfront costs for purchasing property, you may be anticipating paying costly Lenders Mortgage Insurance (LMI). However, some professions and high-income earners may qualify for LMI waivers, saving them thousands of dollars. 

Let’s explore everything you need to know about LMI waivers for professionals, including which professionals qualify and how much you could save. 

How does LMI work?

Lenders Mortgage Insurance is a policy whereby a premium is added to your home loan amount if you borrow more than the amount recommended by the lender. 

When reviewing your home loan application, banks and lenders will evaluate the possibility that you may default on the loan amount. This risk is amplified if you have a deposit under 20%, or refinance with a loan-to-value ratio (LVR) above 80%. 

If you fall into these categories, you will likely be requested to pay LMI. And as the LMI premium is based on the worth of your home, it can cost you tens of thousands of dollars. 

Which professions qualify for waived LMI?

Some banks and lenders may offer LMI waivers depending on your profession and income level, this may include:

• Medical professionals, including medical and dental practitioners, nurses, midwives, physiotherapists, chiropractors, optometrists and veterinarians. 
• Legal professionals, including lawyers, solicitors, barristers, judges and magistrates.
• Accounting professionals, including those part of eligible accounting institutes. 
• Media and entertainment industry professionals.

Qualifying for a LMI waiver usually requires you to certify that you are an industry professional by submitting proof that you are a member of reputed industry associations. For example, big four bank ANZ offers a LMI waiver to accounting professionals that have a current membership or certification with Global Accounting Alliance Members, amongst many other international organisations. 

Depending on your profession, you may also need to earn above a threshold, or minimum income level, to be eligible for LMI waivers - typically above $150,000.

How much can you save with LMI waivers?

The amount you may save by qualifying for LMI waivers will depend on the property’s value and the deposit you have saved.  

RateCity has crunched the numbers on how much you could save if you only had a 10% deposit and qualified for LMI waivers for a variety of property values.

How much you could save with LMI waivers

Source: RateCity Lenders Mortgage Insurance Calculator. Results are estimations for demonstrative purposes and actual LMI figures may vary. 

Why do some professionals qualify for LMI waivers?

Lenders may offer LMI waivers because they are trying to encourage higher-income earning professionals in stable professions to sign up with them. 

These professionals may be less likely to face financial hardship or struggle with their mortgage repayments. They may also be more likely to deposit large sums of money in linked transaction accounts, or qualify for premium credit cards. 

Put simply, they are considered ‘ideal’ borrowers and high-quality customers to have on a bank or lender’s books. 

Which banks offer LMI waivers?

If you’re considering applying for LMI waivers, you’ll need to ensure you’re applying with a lender that offers this generous perk. 

Big four banks ANZ and Westpac provide LMI waivers to eligible borrowers. In fact, Westpac recently expanded its program to allow eligible registered nurses and midwives with a 10% deposit qualify if they earn over $90,000 per annum.

Keep in mind that there is more to a home loan than finding one with waived LMI. You’ll still want to compare your options carefully, including comparing interest rates, fees, features and the lenders’ customer service. Once you choose your ideal home loan, reach out to the lender to confirm they offer LMI waivers for your profession. 

It may also be worthwhile speaking to a mortgage broker for more information on which lenders may offer you LMI waivers. A broker can also provide you with more specialised information on loans that best suit your needs and goals. 

How to avoid paying LMI if you don’t qualify for a waiver

While you may be able to convince lenders to let you borrow a higher amount if you have an excellent credit rating and no outstanding debts, you may still need to pay LMI if you don’t have a large enough deposit or the equity in your home. 

The simplest way of avoiding paying for LMI is to save a deposit of 20% or more, or refinance your home loan with an LVR of at least 80% or less. However, there are other options worth considering for first home buyers:

Go guarantor

You may be able to avoid paying LMI by bringing a family member on to the loan as a guarantor. If you have a 10% property deposit, a guarantor may help secure your home loan with an asset, such as the family home, to the value of the remaining 10%, so that you can avoid paying LMI and boost your chances of approval. This arrangement is not without risk, so do your research before proceeding. 

Government support

First home buyers may want to consider government support schemes, like the First Home Guarantee. This government-backed guarantee allows you to purchase your first home with as little as a 5% deposit. 

The government acts as a guarantor, supporting your application with the remaining deposit amount. For example, if you only have a 5% deposit, the government would guarantee the remaining 15%, so that you would appear to be applying for a home loan with a 20% deposit. 

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