When buying a property, if your deposit is lower than the threshold amount, then home loan lenders may charge lenders mortgage insurance (LMI). The cost of LMI may vary depending on the size of the loan. Apart from stamp duty, LMI can be another expense that must be paid by many property buyers. Let’s understand whether you need to pay LMI:
What is LMI?
Borrowers have to pay the Lenders Mortgage Insurance when getting the loan settlement. The LMI will protect the loan lenders from risks that could arise when you take out a loan more than 80% of your property’s value. To achieve this, lenders mortgage insurance helps lenders to repossess the property if you are unable to pay back the loan amount. For more information on whether you need to pay LMI or not, you can ask Star Homeloans in Australia.
How does LMI Work?
Lenders Mortgage Insurance is an insurance policy taken by a lender if you borrow money more than their recommendations. The policy aims to cover the lender against the risk that the borrower could default on their loan. Basically, the cost of LMI is passed by lenders on to borrowers. When lenders and banks review your home loan application, they will assess the risk that you may default on your mortgage repayments.
What is a Lenders Mortgage Insurance Waiver?
Generally, you need to pay Lenders Mortgage Insurance (LMI) to the lender when you buy a home with less than a 20% deposit. In other words, if you are purchasing a home by borrowing more than 80% of the property value, then you need to pay Lenders Mortgage Insurance. However, if you belong to some specific job profiles that the lenders consider a lower risk, then lenders will waive the LMI costs if you qualify. If you are looking for a trusted and the best mortgage broker in Melbourne to take out a home loan to buy a home, you can rely on Star Homeloans.
Who is Eligible for the LMI Waiver?
The following categories of borrowers are allowed to proceed with home loans without paying LMI:
- Borrowers with guarantor.
- First-home buyers eligible for the First Home Loan Deposit Scheme are guaranteed to waive LMI for as low as a 5% deposit.
- Professionals who meet LMI waiver requirements. While different types of professions are eligible for waived LMI, they each have their own conditions that they need to meet. Professionals who are eligible for waived LMI include doctors, accountants, lawyers, etc.
To be eligible for an LMI waiver, you must need to certify that you are an industry professional by giving proof that you are a member of a reputed industry.
How Much Can You Save with Waived LMI?
The savings you could achieve from qualifying for LMI waivers will depend on the value of the property and the deposit amount you’ve saved.
First Home Buyer LMI Waiver
First-home buyers may also be eligible for an LMI waiver if they are eligible for the First Home Loan Deposit Scheme. The first Home Loan Deposit Scheme is a financial support for eligible first-home buyers. This scheme allows first-home buyers to buy a house with a deposit of 5%. They are also eligible for an LMI waiver, making homeownership even more easy and stress-free.
Is LMI Tax Deductible?
Now, the question arises: Is LMI tax deductible? If you are looking to purchase an investment property, then LMI will be tax deductible. LMI can be tax-deductible and depreciated over the first five years after purchasing a property.
Can LMI be Refunded?
Once you have paid LMI, it won’t be refunded. It’s essential to work closely with a trusted mortgage broker like Star Homeloans to make informed decisions according to your circumstances.
Conclusion
To be eligible for an LMI waiver, you need to meet a few requirements. If you want to secure the best home loan deal while avoiding LMI fees, you’ll need an experienced mortgage broker who specialises in this financing option. Reach out to Star Homeloans in Australia.
