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What Is LMI and How Can You Avoid It?

What is LMI

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No LMI Home Loans

No LMI (Lenders Mortgage Insurance) Home Loans are becoming more common in the market. Your mortgage broker What If We Finance will explain today what LMI is and how it can be avoided.

What Is LMI?

Traditionally in Australia, banks required a 20% deposit to purchase a home. However, with property prices rising so quickly, not many people may have this amount saved. This is where LMI comes in.

LMI is an insurance premium charged to protect the interests of the bank in the unlikely event you default on your home loan. LMI can apply if you do not have a 20% deposit and in some instances, some banks for certain suburbs may require a 30% deposit to avoid LMI.

LMI is a one-off fee and can be paid upfront or added to your loan. If adding LMI to your loan, you need to be careful, because you could end up paying interest. LMI varies between 0.75% and 4% of the loan amount and as a rule, the lower the deposit, the higher the LMI.

You do not need to organise LMI. Your independent mortgage broker, What If We Finance, will take care of this for you.

By using a mortgage broker and depending on your circumstance, LMI can be avoided.

loan discussion

How Can I Avoid LMI?

Specialist Professions

LMI for some professions, such as Doctors, Lawyers, Accountants, and certain medical specialist professions (e.g., chiropractors, physiotherapists) can be avoided.

Typically, banks who waive LMI for given professions will only require a 10% deposit plus government fees, and you do not have to pay LMI. For example, if you buy a new home for $900,000 and government fees are $50,000, you need $140,000 to avoid LMI.

In the above example, depending on the lender, LMI can be as high as $30,000, so you effectively save this amount.

The savings in such circumstances are substantial, and it makes sense to avoid LMI by selecting the appropriate lender who will waive LMI.

It’s important to note that lenders review LMI waivers on a case-by-case basis. Some lenders have minimum income thresholds and may even have limitations on the type of finance.

First Home Loan Deposit Scheme (FHLDS)

The Australian government aims to support eligible buyers by making available a limited number of places each year to support first home buyers to buy a new home. Under this scheme, the government guarantees the loan. Effectively, you can buy a new or established home with a deposit as low as 5% and no LMI.

The scheme has strict criteria, including:

  • All applicants must be Australian Citizens
  • Maximum income threshold for single and joint applicants
  • Maximum property purchase price

In addition, there are limited places available. Typically, the government releases approximately 10,000 places per annum, and these places disappear quickly.

An important point is that each lender has different credit criteria, and this means, for example, some lenders will require a 10% deposit for construction and also genuine savings. All these requirements can be explained and managed by your independent mortgage broker.

Family Guarantee

A Family Guarantee is where a family member offers their property as security to buy a home. The goal is to use the equity in their home to help you avoid LMI. This type of arrangement has a number of risks, and needs to be carefully considered. Legal advice may even be required.

As you can see, there are a number of options that can be explored to avoid LMI. Given the complexity of lender rules and policy, it makes sense to contact your mortgage broker What If We Finance today.

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Matthew B
Matthew B
2022-06-05
Looking at the reviews for What If We Finance, it comes at no surprise to see so many 5-stars. Spiro handled the mortgage part of my girlfriend and I purchasing our first home. He made himself available to us around the clock and ensured that we were across the entire process and felt as comfortable as possible. We're very fortunate to have gone about buying our first home with Sprio and we'd be more than happy to use him for future purchases and to refer on to family and friends. A big shout out to Agnes also who busily works away in the background and also does an incredible job. You guys are the best!
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hari gowtham
hari gowtham
2022-06-03
Very happy with the results from Spiro from start to finish. Spiro and his team are very knowledgeable and have a very quick turnaround time. Couldn't be more happier with the service. Definitely my go-to person for upcoming purchase.
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Gary Shekhter
Gary Shekhter
2022-06-02
Great broker and trustworthy. Honestly had seen 5 brokers and fund this wonderful guy. Who helped from start to finish fast and had our loan in no time at all. Thank you again champ you did an amazing job
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Leonie Kemp
Leonie Kemp
2022-05-29
Thank you Spiro and Agnes for helping with the purchase of my first home. I needed to arrange finance quickly and Spiro did a fantastic job letting me know the best options for me and pushing to get the pre-approval so I didn't miss out on purchasing my home. Everything went very smoothly, thanks for helping make my first property purchase straightforward.
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S S
S S
2022-05-28
Thank you Spiro and team for your help in financing the mortgage for the recent property purchase. Spiro provided timely advise, guided me on the process and was swift in processing the documents. His friendly attitude makes the process even better. Thank you once again.
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Anita Naughton
Anita Naughton
2022-05-27
As a first home buyer I had very limited knowledge on what I needed to do. I searched for a broker and What if we finance stood out due to reviews. I had my first session with Spiro and never looked back! The whole process was seamless, I felt supported and could always connect with Spiro when needed. Spiro and Agnes are experts in what they do and I would highly recommended anyone looking for finance to choose What if we finance. I will be a lifelong customer and look forward to buying our next house with their support.
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Mahmoud Al Kilzi
Mahmoud Al Kilzi
2022-05-25
Spiro & his team did a great job by getting my loan sorted in time. I would recommend them to family & friend. Great work guys much appreciated.
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Rebecca Zeeman
Rebecca Zeeman
2022-05-20
Spiro and Agnes provided great help and advocacy in getting us our home loan. We felt they were always available and were super efficient in getting it all done on time! The process was so simple and without stress thanks them both.
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Irish Azcuna
Irish Azcuna
2022-05-09
I can’t thank Spiro and Agnes enough for making my first home purchase so efficient, stress-free and seamless! If I could give more than 5 stars I would. As a first home buyer applying for one or the government’s schemes, my situation would have been so complicated that I never imagined being able to complete the process in such a short time. Spiro’s in-depth knowledge, invaluable and always-available support, and genuine willingness to help get me the right mortgage for my situation, made everything possible. His pragmatic advice even helped me decide on the right property for us, which would help us achieve our long-term goals. I highly recommend Spiro and his team. We will definitely engage their service again for our next property. They are the best!
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Renee Briggs
Renee Briggs
2022-05-02
Spiro is reliable, has your best interest as his top priority and is fast to get great results. We wouldn't ask anyone else for their professional opinion- Spiro is the best in the business.
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