The 5 LMI saving tips
Did you know that doctors, accountants, lawyers and other select professionals are eligible to borrow 90% of the property of value and pay no Lenders Mortgage Insurance (LMI)?
Even if you aren’t an eligible professional, you may still be able to avoid mortgage insurance or at least reduce your premium with these five golden tips.
1: The loan amount
The larger your loan, the higher the percentage of the loan amount the mortgage insurer will charge you.
Home loans less than $300,000 have very cheap LMI, loans between $300,000 and $500,000 have moderate LMI, and loans greater than $500,000 have very expensive LMI.
If you’re borrowing $300,001, you could reduce your mortgage by just $1 and immediately save as much as $800!
We’re experts in the LMI thresholds that the banks have and know the little tricks they play so you get charged you a far higher premium.
Call us on 1300 889 743 or fill in our online enquiry form and we can help you avoid mortgage insurance.
2: Your LVR
The Loan to Value Ratio (LVR) is the percentage of the property value that you’re borrowing.
If you’re borrowing $900,000 secured on a $1,000,000 property then your LVR is 90%.
The higher your LVR, the higher your LMI premium will be so knowing the cut off points is handy strategy to reducing your LMI bill.
There’s a significant increase in the premium when you borrow just $1 over 90% or over 95%.
If you’re close to these thresholds, reduce your loan amount to 90% or 95% and you can easily save thousands of dollars.
Of course, if you’re in a position to save a 20% deposit, you can actually avoid mortgage insurance altogether.
That’s because LMI is typically only charged when borrowing over 80% of the property value.
3: Choose the right lender and insurer
Different lenders and insurers have different LMI premiums.
This is because they see the risk of different loan types, loan amounts and types of borrowers in different ways, and price their premiums accordingly.
The best way for most people to get the lowest possible LMI premium is to apply with a lender that uses a discounted LMI provider.
This is easier said than done!
Lenders don’t actually publish their LMI rates to the general public and don’t disclose which LMI company insures their loans.
Complete our free assessment form and we can help you find the lowest LMI premium for your LVR and loan amount.
4: Use a guarantor
LMI kicks in when borrowing over 80% LVR but there’s a way around this if you have a guarantor for your home loan.
With your parents guaranteeing your mortgage with their own property, you can not only avoid mortgage insurance but you can borrow up to 100% of the property value plus the costs of completing the purchase.
5: Genuine savings discounts
Each mortgage insurer has several LMI products which they use for different types of borrowers.
Their standard LMI product is usually for people who can demonstrate that they have a saved deposit.
In many cases, they may also have a no genuine savings product, such as Genworth Financial’s ‘Homebuyer Plus’ product.
How does the source of your deposit change your LMI premium?
- 5% genuine savings allows you to get standard LMI rates which is about 25-50% cheaper than a no genuine savings LMI premium.
- No genuine savings and a borrowed deposit, such as a personal loan or a loan from your parents, may mean your premium is even higher than a no genuine savings premium.
This varies between lenders with some having one set of premiums for all borrowers and others loading the premium depending on various factors.
Our mortgage brokers will compare premiums from several lenders to ensure you get the lowest possible premium.
Please call us on 1300 889 743 or fill in our online enquiry form to discover which strategy is right for you to avoid mortgage insurance.
How to avoid paying Lenders Mortgage Insurance - FAQs
Can LMI be waived?
Yes, there are certain lenders who provide LMI waiver for professionals as they are viewed as lower risk borrowers:
- Doctors, lawyers and accountants usually qualify for waived LMI.
- People working in these professions rarely default on their repayments and are high-income earners.
Some lenders offer LMI waiver even if you’re not in these professions. They arrange offers to attract home buyers by waiving LMI even when you’re borrowing over 80% of the property value.
If you want to know if you qualify for these waived LMI offers, call us on 1300 889 743 or enquire online.
How much deposit do I need to avoid LMI?
You will usually need to pay Lenders Mortgage Insurance if you’re borrowing more than 80% of the property value.
To avoid LMI, you will need a deposit of at least 20%.
However, it is difficult to save a larger deposit, especially in a property market where property prices are rising.
You can use our ‘Buy Now or Save More’ calculator to see which option is feasible for you.
There is an option to capitalise LMI where the lender will add the cost of the LMI premium to your home loan, allowing you to get approved for a home loan with a lower deposit.
How to avoid LMI when refinancing?
When you’re refinancing and your LVR is above 80%, then you might have to pay LMI again i.e. if you have less than 20% equity in your property, then you might have to pay LMI.
To avoid this, try to pay down as much of your loan as possible so your LVR is 80% and below.
If you’re refinancing to add a partner, then you might be able to avoid paying LMI if your partner can share the cost.
Get a home loan with reduced LMI
Our mortgage brokers will compare premiums from several lenders to ensure you get the lowest possible premium.
Please call us on 1300 889 743 or fill in our online enquiry form to discover which strategy is right for you to avoid mortgage insurance.