the 5 tips to save lmi
Did you know that doctors, accountants, attorneys, and other select professionals are eligible to borrow 90% of the property value and not pay lenders mortgage insurance (lmi)?
Even if you’re not an eligible professional, you can still avoid mortgage insurance or at least lower your premium with these five golden tips.
Reading: How much deposit do you need to avoid mortgage insurance
1: the loan amount
The larger your loan, the higher the percentage of the loan amount that the mortgage insurer will charge you.
mortgage loans under $300,000 have a very low lmi, loans between $300,000 and $500,000 have a moderate lmi, and loans over $500,000 have a very expensive lmi.
If you’re borrowing $300,001, you could reduce your mortgage by just $1 and immediately save up to $800!
We are experts on banks’ lmi thresholds and we know the little tricks they use to get you charged a much higher premium.
Call us on 1300 889 743 or fill out our online inquiry form and we can help you avoid mortgage insurance.
2: your level
the loan-to-value ratio (lvr) is the percentage of the value of the property that you are borrowing.
if you are taking out a $900,000 secured loan on a $1,000,000 property, then your lvr is 90%.
The higher your lvr, the higher your lmi premium, so knowing your cutoff points is a useful strategy for lowering your lmi bill.
There is a significant premium increase when you borrow just $1 above 90% or above 95%.
If you’re close to these thresholds, reduce your loan amount to 90% or 95% and you could easily save thousands of dollars.
Of course, if you can save a 20% deposit, you can avoid mortgage insurance altogether.
That’s because LMI is typically only charged when more than 80% of the property’s value is borrowed.
3: Choose the right lender and insurer
See also: National Insurance rates and categories: Contribution rates – GOV.UK
Different lenders and insurers have different lmi premiums.
This is because they view the risk of different types of loans, loan amounts, and types of borrowers in different ways, and price their premiums accordingly.
The best way for most people to get the lowest LMI premium possible is to apply with a lender that uses a discount LMI provider.
Easier said than done!
Lenders do not actually publish their LMI rates to the general public and do not disclose which LMI company insures their loans.
Fill out our free evaluation form and we can help you find the lowest LMI premium for your LVR and loan amount.
4: use an endorsement
lmi kicks in when you borrow more than 80% of lvr, but there is a way around it if you have a guarantor for your home loan.
With your parents securing your mortgage with their own property, you can not only avoid mortgage insurance, but you can also borrow up to 100% of the value of the property plus the costs of completing the purchase.
5: genuine savings discounts
Each mortgage insurer has various lmi products that they use for different types of borrowers.
Their standard lmi product is usually for people who can prove they have a deposit saved.
In many cases, they may also have a non-genuine savings product, such as Genworth Financial’s “homebuyer plus” product.
how does the lmi premium change the source of your deposit?
- 5% genuine savings allows you to get standard lmi rates that are approximately 25-50% cheaper than an lmi premium with no genuine savings.
- Without genuine savings and a borrowed deposit, such as a personal loan or a loan from your parents, can mean your premium is even higher than a premium without genuine savings.
- doctors, lawyers and accountants generally qualify for the lmi exemption.
- people who work in these professions rarely default on their payments and have high incomes.
This varies between lenders, with some having one set of premiums for all borrowers and others charging the premium depending on various factors.
Our mortgage brokers will compare premiums from multiple lenders to make sure you get the lowest premium possible.
See also: What to do if Your Homeowners Insurance is canceled | Bankrate
Call us on 1300 889 743 or complete our online inquiry form to find out which strategy is right for you to avoid mortgage insurance.
how to avoid paying mortgage insurance from lenders – frequently asked questions
can i waive lmi?
yes, there are certain lenders that provide an lmi exemption for professionals as they are considered lower risk borrowers:
some lenders offer an lmi exemption even if you don’t have these professions. They run deals to attract homebuyers by waiving LMI even when you’re borrowing more than 80% of the property’s value.
If you want to know if you qualify for these lmi exemption offers, call us at 1300 889 743 or check online.
how much deposit do i need to avoid lmi?
You will generally have to pay mortgage insurance to lenders if you borrow more than 80% of the value of the property.
to avoid lmi, you will need a deposit of at least 20%.
However, it is difficult to save a larger deposit, especially in a real estate market where property prices are rising.
You can use our “buy now or save more” calculator to see which option is feasible for you.
There is an option to capitalize lmi where the lender will add the cost of the lmi premium to your home loan, allowing you to get approved for a home loan with a lower deposit.
how to avoid lmi when refinancing?
when you are refinancing and your lvr is above 80% you may need to pay lmi again, i.e. if you have less than 20% equity in your property then you may need to pay lmi.
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To avoid this, try to pay off as much of your loan as possible so your LVR is 80% or less.
if you’re refinancing to add a partner, you may be able to avoid paying lmi if your partner can share the cost.
get a low lmi home loan
Our mortgage brokers will compare premiums from multiple lenders to make sure you get the lowest premium possible.
Call us on 1300 889 743 or complete our online inquiry form to find out which strategy is right for you to avoid mortgage insurance.
See also: Sovereign – How are insurance premiums set