No LMI Home Loans: How to Avoid Lender’s Mortgage Insurance Costs
Buying a home is an exciting milestone, but the associated costs can quickly add up. One significant expense often overlooked is Lender’s Mortgage Insurance (LMI). LMI is a fee charged by lenders when borrowers have less than a 20% deposit, protecting the lender if the borrower defaults on their loan. For many homebuyers, especially those in high-value markets, this cost can run into tens of thousands of dollars.
However, there are several strategies to avoid paying LMI, making your home-buying journey more affordable. From leveraging professional credentials to exploring government schemes, here’s everything you need to know about no LMI home loans and how to take advantage of them.
1. Parental Guarantee Loans
A parental guarantee loan is one of the most common ways to bypass LMI costs. In this arrangement, a family member, usually a parent, uses the equity in their own property as additional security for your loan. This helps reduce the loan-to-value ratio (LVR) below the critical 80% threshold, eliminating the need for LMI.
How It Works
Let’s say you have a 10% deposit for a $1 million property but need $900,000 to secure the home.
Instead of paying LMI, your parents’ property covers part of the shortfall in security (typically up to 20% of the property value).
Once you’ve repaid enough of the loan or the property value increases, the parental guarantee can be released.
This option is ideal for first-home buyers with supportive family members and can save you thousands, but it’s essential to understand the risks for guarantors, such as potential liability if repayments are missed.
2. Industry-Specific Qualifications
Certain professions are highly regarded by lenders due to their perceived financial stability and earning potential. If you hold qualifications in one of these industries, you might be eligible for an LMI waiver.
Common Eligible Professions
Lawyers
Accountants
Actuaries
Engineers
Architects
See our full list of professions that qualify for LMI Waivers.
Lenders typically require proof of industry accreditation, such as membership in a professional association like CPA Australia (for accountants) or Engineers Australia. You’ll also need to meet specific income thresholds and have a strong credit history.
By leveraging your professional standing, you can access home loans with an LVR of up to 90%—or even higher—without paying LMI. This can be a game-changer for high-earning individuals looking to purchase sooner.
3. LMI Waivers for Health Professionals
Healthcare workers are another group that enjoys LMI waivers. With their stable incomes and essential roles in the economy, lenders often offer competitive deals to professionals in this field.
Eligible Health Professions
Dentists
Pharmacists
Veterinarians
Optometrists
Some lenders extend these waivers to nurses and allied health professionals, though the terms may vary. Health professionals can typically borrow up to 90% of the property value without paying LMI.
If you work in healthcare, check with your broker to ensure you’re accessing the best options available.
4. Government Incentives
Government initiatives can also help you avoid LMI costs, particularly if you’re a first-home buyer or fall within specific income brackets.
Key Schemes to Explore
First Home Guarantee (FHBG): This federal government scheme allows eligible first-home buyers to purchase with as little as a 5% deposit without paying LMI. The government acts as a guarantor for the remaining 15%.
Regional First Home Buyer Support Scheme: Targeted at buyers in regional areas, this initiative aims to boost homeownership in less populated regions.
While these schemes are subject to strict eligibility criteria, they can significantly reduce the upfront costs of buying a home. Speak to your broker to determine if you qualify.
5. Luxury Home Loan Policies
High net worth individuals often have access to bespoke loan solutions that waive LMI costs. Many lenders offer luxury home loan products tailored for buyers purchasing high-value properties or with substantial income streams.
Key Features
Flexible repayment terms and competitive interest rates.
Special terms for investment properties or refinancing.
These policies are particularly appealing to entertainment professionals, entrepreneurs, or executives who may have unique financial circumstances. While the eligibility criteria can be stringent, working with a broker experienced in high-end lending can help you secure these exclusive deals.
6. Combining Strategies
Many borrowers find that combining several strategies works best to eliminate LMI. For example:
A healthcare professional could use their eligibility for an LMI waiver alongside the First Home Guarantee to secure a low-deposit loan.
A high-income lawyer might combine an industry qualification waiver with a parental guarantee to purchase a larger property without exceeding their budget.
Discuss your unique circumstances with your mortgage broker to identify the best mix of options for your situation.
What Are the Benefits of Avoiding LMI?
Cost Savings: With LMI often costing tens of thousands of dollars, avoiding it frees up funds for other expenses, such as renovations or moving costs.
Faster Entry into the Market: Without the need to save a 20% deposit, you can buy sooner, taking advantage of rising property values.
More Affordable Loan Terms: Reducing upfront costs can make your overall mortgage more manageable.
Tips for Securing a No LMI Home Loan
Work with a Specialist Broker: Navigating no LMI loans can be complex, so partnering with an experienced broker ensures you don’t miss out on eligible opportunities.
Maintain a Strong Credit History: A good credit score is essential for accessing LMI waivers and competitive loan terms.
Be Prepared with Documentation: Whether it’s proof of professional qualifications or eligibility for government schemes, having your paperwork in order will streamline the process.
Understand the Risks: Some strategies, such as parental guarantees, come with added responsibilities for third parties. Ensure all parties are fully informed before proceeding.
Conclusion
Avoiding LMI can save you thousands and make your home-buying journey significantly smoother. Whether you’re a healthcare worker, a high-net-worth individual, or a first-home buyer taking advantage of government incentives, there are numerous paths to a no LMI loan.
At Rosh Partners, we specialise in tailoring mortgage solutions to suit your unique circumstances. Whether you’re a first-time buyer, an entertainment professional, or looking to purchase a luxury property, our team is here to help you explore every option. Contact us today to see how we can make your home-buying dreams a reality—without the LMI price tag.
