In today's video, we discuss how professionals, including doctors, lawyers, and accountants, can avoid Lenders Mortgage Insurance (LMI) on their property purchase or refinance. LMI can be a significant cost, but by understanding the conditions and benefits, professionals can save a substantial amount of money. We'll cover the essentials of LMI, eligibility criteria, why banks allow professionals to avoid it, and provide an update on which major banks offer this benefit. So, let's dive right in!
- A Quick Recap on Lenders Mortgage Insurance: Lenders Mortgage Insurance (LMI) is an insurance contract that protects the bank in case a borrower defaults on their mortgage. It is typically required when the borrower has less than 20% equity in the property. Understanding how LMI impacts your ability to buy property is crucial; you can find more detailed information in our video linked below.
- Who Can Avoid Mortgage Insurance and Conditions: Professionals in the fields of medicine, law, and accounting are often eligible to skip LMI due to their lower perceived risk as borrowers. Banks have collected data over many years and identified these industries as low risk, with stable incomes and a reduced likelihood of defaulting on home loans. The conditions for avoiding LMI may vary among lenders and professions, such as holding specific certifications like CPA or CA for accountants and having a valid practicing certificate for lawyers.
- Why Banks Allow Professionals to Avoid LMI: Banks view mortgage lending as a sales business and compete against each other for loans. Providing niche policies, like waiving LMI for professionals, helps banks gain traction in certain industries. Moreover, banks seek to maximise their return on loans, and lower-risk borrowers like professionals offer them a higher chance of repayment.
- Banks That Offer LMI Waivers for Professionals: Among the major banks in Australia, Commonwealth Bank (CBA), National Australia Bank (NAB), Westpac Group, Bank of Melbourne, and St. George are known to offer LMI waivers for professionals. Smaller banks may not have such lenient policies due to their lower risk appetite.
- Consult with a Mortgage Broker for Best Advice: Understanding each bank's specific policy is crucial for professionals looking to avoid LMI. A qualified mortgage broker can be an invaluable resource in navigating the various lender policies, finding the best options tailored to individual circumstances, and potentially saving a significant amount on LMI costs.
For professionals in Australia's medical, legal, or accounting fields, avoiding Lenders Mortgage Insurance can be a game-changer in their property journey. By understanding the eligibility criteria, policies of different banks, and seeking advice from a mortgage broker, professionals can secure a property sooner and save considerable expenses. If you have any questions or need assistance, feel free to reach out to us in the comments below.