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When borrowing more than 80% of a property’s value, lenders require that the borrowers pay Lenders Mortgage Insurance (LMI) to protect the lender in the event that the borrower cannot meet the minimum repayments. It is a general rule that lenders require borrowers to pay a minimum of 20% of the property’s value up front as a deposit to secure their mortgage. However, 20% of the property’s value in today’s property market can be a significant amount and may take several years of saving. Most people prefer to pay the LMI premium, rather than waiting to save for a few more years or pay higher interest rates.

Lenders offer LMI to borrowers who wish to borrow more than 80% of a properties value, which is calculated as a percentage based on your Loan to Value Ratio (LVR) as well as the amount you wish to borrow. The amount of LMI you will be required to pay will depend on a number of factors, for example if a first homebuyer was purchasing a property worth $550,000 and provided a 10% deposit of $55,000 and was looking for a loan term of up to 30 years, the LMI would work out to be approximately $10,000.

A few lenders allow specific occupations to borrow 90% of the properties value without needing to take out LMI. This can offer individuals who come under these occupations the opportunity to save themselves thousands towards their home loan.

The occupations that generally fall into this category are GP’s, hospital employed Doctors, Medical Specialists, Dentists, Veterinary Practitioners, Optometrists, and Pharmacists. However, due to the changing economic climate, lenders have opened this up to new industries including:

Terms and conditions do apply, however if you or someone you know comes under one of these categories, it is advisable that they contact one of our finance brokers to find out more.