Buying a property without a 20 percent deposit will usually incur an insurance fee that is to be paid by the borrower. This insurance fee is called Lenders Mortgage Insurance (LMI) and it is a once-off cost that is paid to protect the bank in the event that the borrower defaults on the loan.
This fee can add up in the tens of thousands of dollars and can often be a limiting factor to entering the market sooner. With the challenge of saving enough cash to pay for the deposit plus purchases costs, an added LMI fee can be another hurdle to overcome when trying to enter the property market.
Although rarely advertised, some lenders offer professional packages for specific professions such as Lawyers, Doctors & Accountants. These types of professions are regarded as lower risk for default by the lenders and therefore specific lenders are prepared to waive the entire LMI fee when the applicant has a 10% deposit. This can provide a substantial saving to the qualifying professional and speed up the process of home ownership.
It is important to note that lenders offering these professional packages tend to require certain criteria to be met before granting the waiver such as evidence of industry registration and minimum income thresholds. The requirements differ for each profession and lender so it is important to speak to a broker to understand what you may be able to qualify for.
Case Study: Accountant Based in Victoria
John is an Accountant and he meets the qualification and income requirements to be eligible for a Professional Package Waiver.
He has saved enough money to pay a 10% deposit plus purchase costs for a $800,000 property in Victoria. John’s lender of choice are willing to waive the Lenders Mortgage Insurance (LMI) fee of $19,087.00.
- If John wasn’t eligible for this waiver and didn’t have enough cash or enough borrowing capacity to cater for this LMI fee, he would not be able to afford the purchase
- By meeting the eligibility requirements, John has saved $19,087.00 and secured the property
A Professional Package Waiver may provide a great opportunity to save thousands of dollars and potentially open up the opportunity to enter the property market sooner. If you are seeking to understand your eligibility, please don’t hesitate to get in touch with the team at 40 Forty Finance.