Accountants looking for mortgage in Australia may have come across LMI and wondered how it would affect their loans. Lenders mortgage insurance (LMI) is a program that insures the lender against default on a home loan by the borrower.
Most Australian mortgage applications require LMI, especially if they have small deposits or high Loan to Value Ration (LVR). Nevertheless, there are lenders who will relinquish LMI for accountants in Australia and save you thousands of dollars towards your dream of owning a house.
This article will provide an understanding of what LMI is, why it is needed and where to find banks providing waivers for Australian accountants.
Comprehending LMI for Accountant
The lenders’ mortgage insurance or commonly abbreviated as the LMI, is a form of security to the creditor in case the borrower breaches on his loan agreement. Generally speaking, most people usually pay off lenders’ mortgage insurance (LMI) upon obtaining a home loan when they lack finances; this occurs particularly if one has small deposit or has high loan-to-value ratio (LVR).
In other words, Loan-to-Value Ratio represents how much amount an individual should borrow based on overall value of property. This system was put in place so that the bank can reduce their risks where it covers them against any potential loss expected from inability of borrowers paying back loans.
The cost of LMI varies depending on; the amount borrowed by an individual’s percentage interest rate at which it charges its clients. Normally more expensive cover tends to be offered by those lending institutions which lend huge amounts of cash at higher LVRs.
Banks Offering LMI Waivers
Lenders mortgage insurance (LMI) is a program that insures the lender against default on a home loan by the borrower.
Most Australian mortgage applications require LMI, especially if they have small deposits or high Loan to Value Ration (LVR). However, some banks offer LMI waivers to accountants in Australia which could save them thousands of dollars and get them into their own homes more quickly.
Some of the banks we discovered that exempt accountants from paying LMIs include:
- ANZ
- NAB
- Westpac
- CBA
- Bank of Queensland
- Bank of Melbourne
For an accountant to qualify for an LMI waiver, certain conditions must be met like:
- Membership in a recognized professional body such as Chartered Accountants Australia and New Zealand (CA ANZ), CPA Australia, or Institute of Public Accountants (IPA)
- The minimum income ranges from $90k-$150k per year depending on the bank and profession.
- The Loan-to-Value ratio can go up to 90% meaning at least 10% deposit based on property value.
Different banks may have different LMI policies and conditions such as:
- Loan amount – Some lenders specify maximum amounts for loans without lenders’ mortgage insurance ranging from $1m to $2m.
- Property Type – Some banks may have limitations on the property types that are eligible for LMI waivers such as owner-occupied, investment or construction.
- Repayment Term – LMI waivers at some banks may be subject to a maximum repayment term of say 30 or 40 years.
Mortgage Options for Accountants
Depending on your needs, preferences, and circumstances as an accountant, you can choose from a variety of mortgage options in Australia. These are some of the common types of mortgages accountants could consider:
1. Owner-occupied mortgages
This is for purchasing or constructing a house that one intends to reside in as their primary home. Such loans tend to have lower interest rates and charges than investment mortgages since they are less risky to lenders. On the other hand, qualification criteria may be more stringent including higher deposit amounts and lower loan-to-value ratios (LVR).
2. Investment mortgages
These allow accountants to buy or construct properties which they may later rent out or sell to make profits from them. Interest rates and fees linked with such products are generally higher than those associated with owner-occupied loans since they pose greater risks towards lenders.
However, these features often entail looser borrowing requirements like smaller deposits and higher LVRs amongst others. Furthermore, tax benefits may accompany investment loans where interests paid as well as other expenses get deducted from rental income.
3. Construction mortgages
Construction financing is applicable when one wants to build a new house or renovate an existing unit. It is usually spread over several months after each phase has been completed successfully in terms of lending process; therefore, these deals carry higher interest rates and fees since they bear more risk due to complexity faced by underwriting teams during approval stages.
4. Refinancing mortgages
Refinancing involves replacing your current mortgage with another provided by either your current lender or someone else in order capitalize on lower interest rates being offered elsewhere on similar products/loan features/conditions.
Conclusion
To Australia’s accountants venturing into the property market, exploring Lenders Mortgage Insurance (LMI) waivers is a strategic move. Certain banks like Westpac and ANZ, have measures for LMI waivers; although specifics vary. Qualifying criteria; going for a professional package and utilizing professional memberships can enhance this likelihood.
Given that different individuals have different circumstances, personal advice from a mortgage broker would be useful in identifying lenders to approach on individual basis. Informed choices and taking opportunities available may facilitate their journey towards owning a house by reducing their financial burden.
FAQs
1. Which banks in Australia offer LMI (Lenders Mortgage Insurance) waivers for accountants?
Different banks however may have different policies regarding LMI waivers but some such as Westpac and ANZ do consider waiving them for accountants.
2. What criteria do banks typically consider for waiving LMI for accountants?
These could include minimum income levels, steady job history or strong financial position with specific requirements varying across respective financial institution.
3. Is having a professional package or a high-value loan a factor in LMI waivers for accountants?
This means that if an accountant opts for professional packages or applies for higher value loans some lenders may opt to waive LMIs on them.
4. Are there any industry associations or memberships that accountants can leverage to secure LMI waivers?
Such banks as may choose to waive LMI for accountants who are members of professional bodies such as CPA Australia or CA ANZ.
5. Would it be wise to ask a home loan broker if there are any banks that give LMI waivers to accountants?
Certainly, talking to a mortgage broker can be useful since they are well aware of different lending institutions’ rules and can point out those that offer LMI waivers for accountants according to personal situations.