LMI Discounts And No LMI
Everyone knows that a lower interest rate is better than a higher rate.
However, few people realise that different lenders have different lenders mortgage insurance (LMI) premiums. What most people also don’t know, is that 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 available? No? This is because lenders don’t advertise their premium rates!
The best way to find the cheapest LMI premium is to call us on 1300 889 743 and let one of our experienced mortgage brokers compare the loans for you.
Although it is increasingly rare, it may be possible to get the lender to waive your LMI completely or to charge a negligible amount. To do this though, most lenders require that you meet the following criteria:
- Maximum loan size $4.5 million.
- Maximum loan of 90% of the property value (borrowing more is sometimes possible).
- You must be a member of an appropriate industry organisation (e.g. AMA).
- You must be on the preferred medical professionals list, a dentist, optometrist, veterinarian or a pharmacist.
- Call us on 1300 889 743 or enquire online to find out more.
Accountants, Lawyers & Engineers
- Maximum loan size $2.0 million.
- Maximum loan of 90% of the property value.
- You must be a member of an industry organisation (contact us for the list).
- You must be either an Accountant, Finance Manager, Auditor, Actuary, Lawyer, Barrister, Solicitor, Engineer, Surveyor, Mine Surveyor, Quantity Surveyor, Geologist or Geophysicist.
- Engineers must work in the mining and resource sector to be eligible for waived LMI.
- You must have an income of over $150,000 per annum or will soon be on a similar income. Rental income can be considered.
- Call us on 1300 889 743 or enquire online to find out the full criteria.
Are there First Home Buyer discounts?
Select mortgage insurance companies have a 15% discount on their LMI premium for first home buyers.
This is only available through the lenders that deal with these specific LMI providers and have negotiated this discount on behalf of their customers.
In most cases, your home loan must be for less than $600,000 and your deposit must not be from a borrowed source.
Remember these basic tips to reduce your LMI premium
The first step in getting the best premium is to understand how the LMI premium is calculated and then determine if there is anything you can do to qualify for a cheaper premium. The factors you should consider include:
The loan amount
The larger your loan, the higher the percentage 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 mortgage by just $1 and immediately save as much as $800!
The LVR of your loan is 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% which means your LVR is 90%. 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, and price their premiums accordingly.
To find the cheapest LMI providers please enquire online or call us on 1300 889 743 to talk to one of our mortgage brokers.
What are genuine savings discounts?
Each mortgage insurer has several LMI products which are used for different borrower and mortgage types. 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
- No genuine savings may mean you pay a higher LMI rate
- No genuine savings and your borrowed deposit (e.g. personal loan, loan from 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.
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 discounted 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 or contact us on 1300 889 743 and one of our mortgage brokers can help you find the lowest premium.
Apply for a Guarantor loan
If you have a guarantor for your loan that is providing their house as additional security for the bank then you will not pay any LMI even if you are borrowing 100% of the property value.
The reason is that 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 mortgage without LMI.
Apply for a home loan
Our mortgage brokers know which lenders mortgage insurers are the cheapest. Some lenders offer specials in an attempt to gain additional market share, and in many cases, these LMI specials are not advertised to the public.
Please enquire online or call us on 1300 889 743 to discuss your situation with one of our mortgage brokers.