Nobody wants to pay Lenders Mortgage Insurance, but not everybody has a 20% deposit. So, LMI allows first home buyers to buy a home with a lower deposit sooner, however they can be quite expensive.
Luckily, a few of our lenders offer significant LMI discounts for first home buyers.
Eligible first home buyers can reduce Lenders Mortgage Insurance fee by as much as 25%-33%. That saves you thousands of dollars.
What is Lenders Mortgage Insurance (LMI)?
Lender’s mortgage insurance is an insurance that protects the banks or lenders when the borrower’s deposit is less than 20% of the property’s purchase price.
Generally, you are not required to pay this upfront. It is added to your loan.
The LMI fee depends on several variables, including the loan amount and the deposit amount, so it can vary significantly.
Please use our LMI calculator to get an estimate.
What LMI discounts are available right now?
25% LMI discount for first home buyers
Currently, one of our lenders has a 25% discount on LMI for first home buyers.
You can combine the discount on LMI with low variable rates, and no annual fees.
To qualify for the first home buyer LMI discount, there are a few eligibility criteria:
- Only available to first home buyers to buy or construct their first residential dwelling solely for owner-occupation
- Limited to one security property per application. Excludes vacant land purchases; however, construction loan applications that include refinancing a land loan on the security property are eligible
- If it’s a joint application, all applicants need to be first home buyers, (applicants can own/have owned an investment property, provided they do not/have never owned an owner-occupied one)
- Includes approval in principle (AIP) applications and available on home loan products. Not available for top-ups, variations and internal refinances
- The discount is calculated from the standard LMI rate chart offered to the lender by its mortgage insurer
- A maximum LVR of 95% (inclusive of LMI applies) with a maximum loan amount of $1,200,000
- Borrowers need at least a 5% deposit to qualify for both the LMI and variable rate discount
- Borrowers with larger deposits (lower LVR) can access better rates
- The application must be flagged as a first home buyer (FHB) while applying online to benefit from the LMI discount
How much am I saving with this discount?
For example, if you are a first home buyer with a $25,000 deposit looking to buy a $500,000 property. The maximum amount of LMI you would be paying is $16,000. However, if a 25% LMI discount is applied, you will only pay $12000 in LMI and save $4000!
33% LMI discount
A handful of our lenders on the lending panel are currently offering new first home buyers with a 33% discount off their LMI premium.
As a first home buyer, you could potentially save around $2,200 in LMI fees, if for instance, you wanted a home loan to purchase a house worth $390,000 with a 10% deposit.
Note that, since the discount is a flat percentage, the higher the LMI premium, the bigger the discount.
- This discount only applies to owner-occupied loans but not investment loans
- The discount applies to any new first home buyer who gets formally approved on or after 1 January 2020
- Max loan size of $1,200,000 applies
- New construction loans are also eligible
The 33% LMI discount may be withdrawn at any time as such and it is recommended to confirm it with one of our specialist mortgage brokers.
How much am I saving with this discount?
For example, if you are a first home buyer with a $40,000 deposit looking to buy a $700,000 property. The maximum amount of LMI you would be paying is $30,000. However, if a 33% LMI discount is applied, you will save $9,900!
$1 LMI Offer
While, the $1 LMI offer sounds great, the main issue with this offer is the fact that it is limited to a loan to value ratio of just 85% of the property value.
For first home buyers with a 15% deposit, you will only be charged $1.00 LMI. It will be reflected in your loan offer documents.
It’s worth noting that LMI is subject to approval, and the customer must adhere to LMI obligations during the loan agreement.
This offer is available for
- First home buyers who apply for a home loan for their first property
- Applications submitted must have LVR up to 85% at the time of approval
- For joint applications, only one applicant is required to be a first home buyer
- Owner-occupied with principal and interest repayments only
- Maximum loan size of $850,000
The offer is not available for
- Owner-occupier with interest-only or residential lending originated under family or company trusts
- Conjunction with the family pledge option (guarantor loans)
- All residential investment home loans, portfolio loans and construction loans
- More than one property is to be financed per application
Some mortgage insurance companies have an 8-15% discount on their LMI premium for first home buyers.
This is only available through lenders dealing with these specific mortgage insurance companies. The lenders negotiate this discount on behalf of the borrowers.
In most cases, your home loan should not be more than $1,200,000 and your deposit should be genuine savings.
Some lenders offer special interest rates specifically for first home buyers or for 95% home loans.
Tips: LMI Discounts for first home buyers
Add some tips such as:
- Compare LMI premiums. Lenders know that first home buyers mostly focus on interest rates so they’ll charge you more in LMI fees. So it makes sense to shop around for a loan that has a good interest rate and discounts on LMI.
- Read the fine print. The terms and conditions of these offers are very specific. E.g. The $1 LMI offer is only available when borrowing upto 85% of the property value. Hardly an offer when you consider that some lenders waive the LMI fee completely in such cases.
- Grow your knowledge base. Check our first home buyers guide that covers the entire home buying journey.
Apply for a home loan with LMI discounts
At any point in time, our mortgage brokers know which lenders are offering great interest rates with significant LMI discounts.
Some lenders offer specials in an attempt to gain additional market share, our mortgage brokers are aware of them but in many cases, these LMI specials are not advertised to the public.
To find out which LMI discounted home loan you qualify for, please complete our free assessment form or call us on 1300 889 743 and discuss your situation with one of our specialist mortgage brokers.