Lenders Mortgage Insurance (LMI) is one of the things that can make your home loan in Victoria extra expensive. This one-off fee serves as a penalty when you produce a deposit worth less than 20% of the property value. LMI protects your lender in case you default on your mortgage. Buying one of the master-planned estates around Point Cook, Victoria without paying one-fifth of the price up front can cost you thousands of dollars more.
Many borrowers agree to pay the insurance to enter the market sooner or avoid losing out to others for attractive properties. Less desperate individuals take time and study different options to reduce the premium when it can’t be eliminated entirely.
Here are the many scenarios when a lender might agree to lower your LMI premium or even waive it altogether:
If You Borrow Less
Lenders calculate LMI premiums differently, but the cost is generally relative to the size of your loan. Borrowing less money means paying for less insurance. Use an LMI calculator you can use to do math more efficiently and to have an idea of the cost before speaking with a lender.
If you can pay a deposit equivalent to 15% of your prospective property’s value, a lender might loan you the funds without charging LMI. However, you need to have a flawless credit history to establish yourself as a low-risk borrower. Also, you need to buy a property in a major metro area. A high-growth location helps guarantee steady capital appreciation and strong demand, making it easier for a lender to sell a foreclosed property.
If You Have a Guarantor
A guarantor is a person that agrees to be fully or partially responsible for the loan in case the primary borrower stops repayment. Aside from the house being purchased through a mortgage, a guarantor can provide his or her property as collateral for the loan.
The involvement of two securities for the mortgage is usually more than enough to offset the risk of lending. If you take out a guarantor loan to buy a house, you might not be asked to pay any deposit at all, although having sufficient genuine savings is still essential. Also, you might even be allowed to borrow 105% of the property value.
If You Are a Highly Regarded Professional
Professionals as inherently less risky borrowers. Lenders consider doctors, lawyers, accountants and professional athletes safe because these individuals usually have a high income and enjoy stable employment. If you have one of these professions, a lender will be likely to exempt you from LMI payment.
Engineers and mining specialists, such as geologists and quantity surveyors, don’t always get the same privilege, though. Some lenders aren’t comfortable with the volatility and unpredictability of the mining industry as a source of jobs.
If You Are a First Home Buyer
A first home buyer may enjoy LMI discounts. The amount of premium reduction varies, and not all lenders provide such a benefit.
LMI is an expense without advantages. It’s imperative to explore all options to get rid of it no matter how bad you want to buy a new property.