LMI waiver for professionals

When calculating your upfront costs for purchasing property, you may need to pay costly Lenders Mortgage Insurance (LMI) if your deposit is low. However, some professions and high-income earners may qualify for LMI waivers, which could save 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 an insurance policy that a lender will take out if you borrow more money than the lender recommends. This policy covers the lender (and NOT the borrower) against the risk that the borrower could default on their mortgage.   Lenders typically pass the cost of LMI on to borrowers.

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

If you fall into these categories, you will likely need to pay for the lender’s LMI policy. And as the LMI premium is based on the worth of your home and the size of your deposit, it can potentially cost you tens of thousands of dollars. 

Why do some professionals qualify for LMI waivers?

Lenders may offer LMI waivers because they are trying to encourage higher-income earning individuals 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 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 doctors, dentists, 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.
• Industrial professionals, including engineers and miners

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 a reputed industry association. 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, among many other international organisations. 

Depending on your profession, you may also need to earn more than a minimum income threshold 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. 

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 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 levels of 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 be worth speaking to a mortgage broker for more information on which lenders may offer LMI waivers. A broker can also provide 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 a high income, low expenses, 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 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. But as this may not be as easy as it sounds, there are other options available for first home buyers to consider:

Go guarantor

You may be able to avoid paying LMI by bringing a family member on to the loan as a guarantor. For example, 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, for both the borrower and the guarantor, 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 be effectively applying for a home loan with a 20% deposit. 

Compare home loans in Australia