If you don’t have a 20% Deposit ( 80% LVR loan), you generally need to pay a once off insurance called Lenders mortgage insurance ( LMI).
This can range from 0.50% to 4% of the loan amount depending on how small your deposit is or how high your LVR ( Loan to value ratio) is.
However there are good news, in this current competitive lending environment there are ways to either waive or reduce the lenders mortgage insurance premium.
How can I obtain a LMI wavier?
Some banks will pay for the LMI cost if your LVR is 85% or below so you will need a 15% Deposit. Each structure will produce a different result and is suited to different circumstances and goals.
If you’re a first home buyer, you may be eligible for a government grant which will pay for the LMI cost up to 95% LVR
If you work in the following industries it may be possible to obtain a LMI wavier up to 90-95% LVR as a home owners (no need to be a first home buyer) or investor- Health industry, lawyer, accountants and engineers.
How is the LMI paid?
The full LMI cost can be added to the loan up to the product’s max LVR or it can be paid upfront.
Can I get a discount on the LMI cost?
Yes. Like an insurance policy it pays to shop around and compare. Each bank has a different premium agreement with their chosen insurer.
Some banks will even consider paying for part of the LMI during the negotiation process or offer a cheaper monthly instalment rather than paying for the LMI cost upfront.
Is LMI tax deductable?
Yes but only if it’s used for investment purposes.