Lenders Mortgage Insurance exemptions
Even if your Loan to Value Ratio (LVR) is over 80%, your LMI could be waived if you meet some specific conditions. While these are rare and have strict qualifiers, if you are able to prove that you meet the conditions, you could have the opportunity to either receive a discount on your LMI or even have the LMI waived.
This is examined on a case-by-case basis, but some of the conditions could include:
- The LVR is only slightly over the 80% threshold
- No LMI payable for loans up to 90% LVR for certain professions
- Your lender has an internal LMI substitute
Professions that may be eligible to have LMI waived
For most applicants, the maximum LVR before LMI needs to be paid is 80%. However for certain professions, LMI may be waived for LVRs up to 90% and are assessed on an individual basis.
These professions include:
- Medical professionals: doctors, dentists, veterinarians, optometrists
- Lawyers, solicitors and barristers
(Note that you will also need to be a member of specific associations for your profession)
An expert mortgage broker can tell you whether you are eligible for LMI exemption or discount.
Risk Fee – an LMI substitute
Whilst most lenders generally rely on lenders mortgage insurance if the LVR is above 80%, some lenders have created their own alternative (and often internal) risk process. In these cases, the lender will charge a one off ‘risk fee’ as an alternative to LMI.
There are several advantages to a risk fee:
- The fee is often less than the standard LMI for that loan amount
- There are no insurance taxes to be paid as a 'risk fee' is not an insurance cover. These savings are generally passed on to the applicant
Lenders that waive LMI in favour of their own risk fee (also called Reduced Equity Fee – REF or Low Deposit Premium – LDP) have the ability to keep the loan process internal using their own policies.
Risk fees will normally also apply to non-traditional loans, for example those borrowers who have had past credit issues. These may be payable regardless of LVR.
If you would like to explore LMI alternatives and find out if you are eligible, contact us today to speak with one of our expert mortgage brokers who will assess your individual situation and provide you with tailored advice.