LMI Waiver for Professionals - Is it a thing of the past with COVID-19?
In Australia, professionals are not only highly admired socially, but also financially. The financial prestige comes up into two aspects. Firstly, as reported by The Australian Financial Review in June 2020, professionals are undoubtedly among the richest, with anaesthetists at the top earning a median taxable income of $366,387 in the financial year of 2018.
Secondly, when it comes to borrowing money from the banks, professionals are warmly welcomed with different sorts of benefits. Among these, LMI waiver for home loans up to 90% LVR (loan to value ratio) is one of the most popular policies that attract professionals as they have a higher likelihood to buy multiple investment properties and negatively gear them in order to save on taxes.
Lenders Mortgage Insurance (LMI) is an insurance premium paid by the borrower generally when the LVR (loan to valuation ratio) is over 80%. That is, if the deposit amount on the property is less than 20% of the value of property (not the purchase price) you are planning to buy.
In Australia, though some large lenders have their own associated insurance providers, there are mainly two mortgage insurance companies that provide lenders mortgage insurance (and your lender chooses who they want to partner with).
LMI waivers means this premium will be saved, which otherwise may cost 2-3% of the loan amount. This can amount upwards of $12,000 for a $500,000 loan! This also means for borrowers that are eligible for an LMI waiver, their maximum loan size increases for their next investment property!
Which professions are eligible for an LMI waiver?
Depending on the lender, the professions which are eligible for an LMI waiver may include: accountants, barristers, dentists, doctors, engineers, lawyers, medical specialists, optometrists, sports professionals and veterinarians. This list is not exhaustive and varies from lender to lender.
In order to be eligible to enjoy the benefits, a careful look at the lender policies is crucial. Different lenders have different policies, and different lenders have different appetites and different criteria for different professionals.
If we take the the big four banks as an example, one of them will only apply LMI waivers to professionals in the health sector; they will not apply LMI waivers for accountants, legal, engineering or sports professionals. The rest of the big four will consider professionals in accounting and legal disciplines for LMI waivers. One lender would even consider professionals in sports and entertainment, mining, energy and resources industries eligible for LMI waivers.
It is best to speak with a mortgage broker, like Reservoir Finance who have in depth knowledge of the lender policies in order to attain an LMI waiver.
What is the criteria to be eligible for an LMI waiver?
Though lenders may have different criteria, there are a number of criteria that is common amongst them.
Apart from the qualifications, an annual gross minimum income requirement of $150,000 or more may be required by certain lenders. As the requirement only refers to the gross income, other incomes including rental income will be taken into consideration. For applications with multiple applicants, combined income may be regarded as total gross income, while some lenders require the qualified borrower to have at least an equal share of the property.
LMI Waiver for Accountants, Actuaries and Financial Planners - CPA Included!
There are a small number of lenders who offer LMI waivers for accountants up to 90% LVR! In general, to be recognised as an accountant, you will need to have a current membership at one of the following professional membership bodies:
- CA (Chartered Accountants Australia & New Zealand)
- CPA (Certified Practising Accountant)
- CFA (Chartered Financial Analyst Institute) or
- FIAA (Fellowship of the Institute of Actuaries of Australia).
n addition, most lenders that do offer an LMI waiver for accountants will also have a minimum income requirement (generally in excess of $150,000 AUD per annum). Though this may change and it is best to speak with a mortgage broker such as Reservoir Finance who is up to date with the ever changing lender policies.
Please note that being eligible for an LMI waiver still requires you to meet all standard lending criteria, otherwise your borrowing capacity may be impacted.
An example of a lender who offers an LMI waiver for accountants in Australia is ANZ. They do not have any minimum income requirements, however we find that their credit scoring policies are very tough and lately we are seeing that they have lengthy loan approval times as well as higher interest rates compared to their competitors. Essentially you are paying for the LMI waiver through higher interest rates with this lender.
As a result, ANZ might not be the best lender for your personal and financial circumstances even if you are eligible for an LMI waiver. At Reservoir Finance, we will always take your entire personal situation into account and put your needs and goals first. Work with us today to assess your eligibility and let us help you find a lender that best suits your circumstances.
LMI Waiver for Lawyers and legal professionals
If you work in the legal profession (such as a lawyer, solicitor, barrister, judge or magistrate) then you might be eligible for an LMI waiver with a handful of lenders.
In general, these lenders require you to hold a current practicing certificate issued by your relevant state or territory legal practice regulator body. If you are a judge or magistrate, then a current copy of the current commission or letter of appointment is required.
In general, lawyers can borrow up to 90% LVR without needing to pay lenders mortgage insurance! However, there are usually minimum income requirements (ranging from $120,000 to $150,000+ per annum). Some lenders may also require you to be a member of a legal professional membership body such as the Law Council of Australia or The Australian Bar Association.
An example of a lender who offers LMI waivers for lawyers in Australia is St George. Prior to COVID-19, St George required a minimum total gross income requirement of $150,000 per annum in order for legal professionals to be eligible for LMI waivers. However in 2020, they withdrew all LMI waivers for lawyers citing uncertainty, while later in 2020 they reinstated the policy but made a few changes. For example, now the requirement for gross taxable income has been reduced to $120,000 and has to be qualifying professional income, which means the rental income is now excluded to the total eligible income.
At Reservoir Finance, we aim to look at the entire deal and transaction and make recommendations suited to your needs. Sometimes savings through LMI waivers can easily be eroded through higher interest rates, higher fees or not worth any additional hassle that switching lenders may introduce. Partner with us today to assess your LMI waiver eligibility and let’s see if there is a better loan for your needs out there.
LMI Waiver for Doctors, Dentists and Medical Professionals
There are many medical professionals that are eligible for an LMI waiver! These may include (but not limited to) doctors (GPs and interns included), dentists, surgeons, pharmacologists and more! Due to the stable and high income, lenders often have specialist loans just for doctors and medical professionals and provide them with extra benefits in addition to LMI waivers.
Similar to other professions, lenders who offer LMI waivers for doctors, dentists and medical professionals will require evidence of current evidence of a relevant association such as the Australian Medical Association or the Australian Dental Council.
There are also minimum income requirements. The main challenge that many medical professionals face is proving their income to lenders. This is due to many doctors and specialists being contractors or sub contractors to practices or hospitals, creating more paperwork and layers for lenders to work through in order to confirm income. In addition, overtime work is sometimes treated differently depending on the lender.
This means you will need a knowledgeable mortgage broker such as Reservoir Finance who can understand your income structures and put forward lender recommendation who will treat your income most favourably in order to help you get a doctors home loan.
LMI Waiver for Engineers
If you work as a specialist mining engineer, geophysicist, geologist or surveyor, there are lenders in Australia that offer LMI waivers for these professions! However it is quite challenging as lenders are more cautious in offering LMI waivers for engineers due to certain roles being unstable.
For the lenders that do offer LMI waivers for engineers, you may be able to borrow up to 90% LVR provided you meet the eligibility criteria.
In general, a minimum income of $120,000 per annum is required in addition to membership of a professional body such as Engineers Australia, Surveying & Spatial Sciences Institute of Surveyors or Australian Institute of Geoscientists.
It is best to contact Reservoir Finance to assess your eligibility given that the number of lenders who offer an LMI waiver for engineers is quite small. We will work with your personal circumstances to put forward the best products for your goals.
LMI Waiver for Athletes and Sports Professionals
If you are a professional athlete or coach, with a contract and/or income history for at least two years with your team(s), then you may be eligible for LMI waivers with some lenders!
The main challenge is due to the volatile nature of professional sports contracts (and injury from sports), lenders will generally exercise caution with loans to athletes and professional sports persons. As a result, the main hurdle that needs to be overcome is strong evidence of stable income (or side income) in order to meet bank criteria.
Please contact Reservoir Finance if you are an athlete, coach or sports professional. We can help walk you through eligibility criteria in more detail as well as understanding your situation so that we can provide tailored recommendations to your circumstances.
LMI Waiver for other professions (eg veterinarians, pharmacists)
There are other more niche professions which, with certain eligibility criteria, may have an LMI waiver available to take advantage of with some lenders. For example, veterinarian or pharmacist.
Apart from the qualifications, an annual gross minimum income requirement of $120,000 or more may be required by certain lenders. As the requirement only refers to the gross income, other incomes including rental income will be taken into consideration. For applications with multiple applicants, combined income may be regarded as total gross income, while some lenders require the qualified borrower to have at least an equal share of the property.
Has COVID-19 changed lenders' attitudes towards LMI waivers?
COVID-19 has unfortunately changed the world significantly. Due to the once-in-a-century pandemic, lending policies have unsurprisingly tightened in many ways as banks and lenders seek to reduce their risk. Even though professions in many sectors have not seen the risk of losing jobs or facing severe revenue decreases, the lenders cautiously changed their LMI waiver policies and list of eligible borrowers as a part of the responses to the pandemic. However, towards the end of 2020, most lenders have reinstated LMI waivers for professionals due to the stability of COVID in Australia.
Want us to help you check eligibility for an LMI waiver?
A mortgage broker is best placed to help professionals check eligibility for an LMI and guide them through the loan process. Reservoir Finance has a team of professionals who have all previously worked in banks before joining us. This means we know the lender policies like the back of our hand.
Partner with us for your home purchase or refinancing and we will help you save time and money on your loan application and home loan monthly repayments. We will be upfront and transparent with you about your eligibility with LMI waivers and will also seek your best interests.
We will provide you with an obligation free assessment and no upfront mortgage broker fees (less than 1% of our applications incurred any mortgage broker fees from us). Contact us using the form below or call us on (02) 8288 9123 and we would be happy to help you out!