LMI discounts and no LMI

How to get the cheapest LMI premium

Family having funEveryone knows that a lower interest rate is better than a higher rate and applies for the cheapest loan that is suitable for them. However few people seem to realise that different lenders have different LMI premiums and the savings are often far more significant than any difference in interest rate.

Have you ever seen an ad on TV claiming that a lender has the cheapest LMI premiums? No? That is because lenders don’t advertise their premium rates. The best way to find the cheapest LMI premium is to enquire online and let one of our experienced mortgage brokers compare the loans for you.

Basic tips to reduce your premium

The first step to getting the best premium is to understand how the LMI premium is calculated and see if there is anything you can do to qualify for a cheaper premium. The factors you should consider are:

  • The loan amount: The larger your loan the higher the % of the loan amount the mortgage insurer will charge you. 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 are borrowing $300,001 you could reduce your loan by just $1 and save as much as $800 right away!
  • The LVR: The LVR of your loan is basically the percentage of the property value that you are borrowing. If you are borrowing $900,000 secured on a $1,000,000 property then you are borrowing 90% and so have a 90% LVR. The higher your LVR the higher your LMI premium. There is a significant increase in the premium when you borrow just $1 over 90% or over 95%. If you are close to these thresholds then reduce your loan amount to 90% or 95% and you can easily save a thousand dollars or more.
  • The lender / mortgage 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, so price their premiums accordingly. To find the cheapest LMI providers please enquire online to talk to one of our mortgage brokers.

First Home Buyer discounts

Select fee mortgage insurance companies have a 15% discount on the LMI premium for first home buyers. This is not available through all lenders, only the lenders that deal with these specific LMI providers.

Waived LMI / Reduced LMI

Although this is increasingly rare, it may be possible to get the lender to waive your LMI completely or to charge a negligible amount. Generally this can only be done if you meet the following criteria:

Waived LMI

  • You have at least 5% genuine savings.
  • Your loan is no more than $290,000 at 90% LVR.
  • Your loan is no more than $360,000 at 85% LVR.
  • You have a perfect credit history.

Reduced LMI

  • You have at least 5% genuine savings.
  • You are borrowing no more than 90% of the property value.
  • You have been in your job for at least 2 years.
  • You have a perfect credit history.
  • You are borrowing no more than $800,000.

If you meet these criteria then please enquire online and we’ll see if we can get you either an LMI waiver or a drastically reduced premium. There are no exceptions made to the above criteria.

Genuine savings discounts

Some mortgage insurers have several LMI products. Their Standard LMI 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”).

If you can prove a saved deposit then these LMI providers will give you the cheaper premium of their Standard LMI rather than their more expensive Non-Genuine Savings LMI. If your deposit is not just Non-Genuine Savings but has also been borrowed then you may be penalised with an even higher premium, depending on the LMI provider.

Choose the cheapest provider

The best way for most people to get the lowest possible LMI premium is to apply with a lender that uses a very cheap LMI provider. Lenders do not publish their LMI rates to the general public and do not disclose which LMI company insures their loans. Enquire online and one of our mortgage brokers can find the cheapest premium for you.

Guarantor loans

If you have a guarantor for your loan that is supporting your loan application by putting up their house as additional security then you will not pay any LMI, even if you are borrowing 100% of the property value. This is because when the guarantor’s property is taken into account, you will be borrowing less than 80% of the total value of both properties so the lender will be happy to approve your loan without Lenders Mortgage Insurance.

Apply for a home loan

Here at the Home Loan Experts our mortgage brokers have extensive knowledge of the Lenders Mortgage Insurers and know which ones are the cheapest. Please enquire online to discuss your situation with a mortgage broker.