LMI waiver for lawyers explained
Lawyers may be able to purchase or refinance earlier and achieve significant cost savings upfront using the LMI waiver for lawyers.
Borrowers have different experiences with Lenders Mortgage Insurance (LMI), as some may be willing to pay the cost when their deposit is less than 20%, while others may see it as a hindrance to buying a home in their preferred price range.
Typically, borrowers with a deposit of less than 20% are required to pay LMI to protect the lender’s risk in case of loan default. The cost of LMI can be substantial, but eligible lawyers may be able to benefit from waived LMI.
A lawyer purchasing a $800,000 property with a 10% deposit could save more than $17,000 in fees by avoiding LMI. The savings could be even greater for a $1,500,000 property. A 90% LVR home loan would normally attract LMI, but avoiding it could extend savings to around $35,000.
See my list of job titles eligible for a LMI waiver for lawyers
Are home loans for lawyers worth it?
Home loans for lawyers with an LMI waiver could prove valuable in terms of both cost savings and opportunity. The benefits for borrowers can extend beyond the immediate cost savings associated with a lenders mortgage insurance waiver.
Upfront savings
One of the main attractions for a LMI waiver for lawyers is the potential for substantial upfront savings by avoiding the LMI premium.
The LMI costs is often significant because the two main factors determining the cost are loan-to-value ratio (LVR) and loan size.
Typically, for the same LVR, a higher loan amount would attract a higher LMI premium. The reverse will generally apply also.
Lenders view the legal industry as a source of stable employment with the potential for lawyers to earn high incomes. High incomes can often service high loan amounts. This makes lawyers attractive borrowers for lenders to accommodate with LMI waivers. As a result, some lenders provide LMI waivers for lawyers, which can translate into significant savings for borrowers.
Consider a home loan with a 10% deposit on a $800,000 purchase price compared to a 10% deposit on $1,500,000. A borrower with LMI waived could avoiding paying over $17,000, or even $35,000 in LMI costs.
Given the high earning potential within the legal profession, there is lender appetite to consider loans of around $4,000,000 (with limited scope for more) with waived LMI.
Buy a home sooner
For eligible lawyers, a LMI waiver could make buying sooner a reality. Borrowers can take a while to save enough funds to cover a 20% deposit and the additional expenses such as stamp duty. So, home loans designed for lawyers provide an opportunity for a 10% deposit which can translate to less savings, and less time, to be in a buying position.
Compare the amount required to save a 20% deposit to a 10% deposit. We are ignoring other costs like stamp duty because this normally be the same for each scenario.
For an Australian home priced at around $800,000, borrowers could purchase with a $80,000 deposit (plus other fees like stamp duty) and avoid LMI. This eliminates the need to save the extra $60,000 to reach a 20% deposit. For a $1,500,000 purchase a 10% deposit is $150,000 compared to a 20% deposit of $300,000.
Refinance over 80% LVR no LMI
A refinance home loan for the right borrower can bring numerous benefits, be it lower rates, cash back offers or seeking out a bank with more sustainable values.
A LMI waiver for lawyers can also be applicable to refinance home loans for homeowners with less than 20% equity, not just those purchasing a property.
Investment home loans
LMI waivers for lawyers can also be used buy investment property. Buying an investment property (or multiple properties) with less than a 20% deposit allows an investment property strategy can be undertaken with as little as 10% deposit.
Of course, any investment strategy will require professional tax and financial advice.
LMI waiver checklist for lawyers
There are generally accepted criteria for to be eligible for the LMI waiver for lawyers. This checklist offers a guide only, as each lender will have their own strict criteria. Do not rule yourself as eligible or ineligible based on this guide. Speak to a professional for any specific criteria that applies to your circumstances.
Professional requirements
Lenders offering home loans for lawyers with LMI waivers place a large emphasis on professional memberships of the individual. This is because there are many job roles in which lawyers operate that do not have a specific job tile of ‘lawyer’. Lenders usually consider professional memberships as an important piece in qualifying lawyers for an LMI waiver.
The professional membership for legal professionals is usually their practising certificate required to practice as a lawyer, solicitor or barrister in their relevant Australian State and Territory. Within the legal profession some exceptions to this might apply as roles may prohibit holding a practising certificate.
Income requirements
Minimum income thresholds to support an application for an LMI waiver is a qualifying tool that can be used in home loans for lawyers. Some lenders might need to see income levels over $100,000, but there are lenders who do not need minimum income thresholds need to be met.
Loan requirements
Loan requirements vary depending on the type of loan and purpose of the home loan. Multiple lenders have scope to waive LMI for both investment and owner-occupied loans. LMI waivers can also be used for both refinance home loans and purchases.
It is worth noting lenders may apply restrictions to loan amounts, LVR, or repayment types when granting an LMI waiver. For instance, investment lending may be considered for interest-only repayments, whereas owner-occupied lending may only have a principal and interest repayment option.
How to qualify for a LMI waiver
To qualify for an LMI waiver, lenders often need to understand the legal qualifications and current employment for the individual. LMI waivers for lawyers see lenders also rely on their practising certificate to assist with qualifying their qualifications and professional standing.
Here are some examples of job roles that individuals could be performing and still be considered for a LMI waiver for lawyers. The lender will need to be satisfied they have appropriate professional memberships in line with their own LMI waiver specific guidelines.
Borrowers should speak to a professional as part of any initial enquiries to find out what home loans might be available for your specific job role and circumstances.
How can I get a LMI waiver for lawyers?
If you want to know if you are eligible for a LMI waiver speak to a mortgage broker or your lender—or both.
With the help of a specialist lender, lawyers can explore different options for financing their property purchase or refinance—and determine the best approach for their individual needs.
FAQs
Can I get a LMI waiver for professionals if I am not a lawyer?
Yes, it is possible to get a LMI waiver for professions other than legal professionals. While some lenders may offer specific LMI waivers for lawyers, professionals such as doctors, accountants and physiotherapists may also be eligible for similar waivers.
A mortgage brokers role is to explore various options and finding the right loan for your situation. Here are some examples of professions that may be eligible for a LMI waiver for professionals other than lawyers.
Can I get a joint home loan and still access a LMI waiver for lawyers?
Yes. The LMI waiver for lawyers is based on the eligibility of the legal professional but often accommodates another borrower, such as a spouse.
Final word
For eligible borrowers, home loans for lawyers can be an attractive option as they can have their LMI costs waived. This can lead to substantial savings on fees and even allow them to bring forward the timeframe in which they were anticipating buying a property—with a potentially smaller deposit.
LMI waivers for lawyers can provide an opportunity for entry into the real estate market for a primary residence or investment property—or both.
