The best jobs if you want to avoid paying LMI
Buying a home just got easier for some Australians, with the Commonwealth Bank (CBA) expanding its policy to waive lenders mortgage insurance (LMI) for select professionals.
From July 30, pharmacists, junior doctors, banking staff, judges and magistrates are among those who may no longer have to pay LMI - a cost that can run into the tens of thousands.
"This is definitely a good thing," says Andrew Tauriello, mortgage broker at Lending Hub Co in Sydney.
"Lowering the pharmacist income threshold to $100,000 opens the door for more entry level positions and younger applicants," he says.
"Recognising junior medical staff under limited registration, and streamlining requirements for banking professionals and the judiciary, are all steps in the right direction."
What is LMI and why does it cost so much?
Lenders mortgage insurance is a one-off fee charged when you have less than a 20% deposit.
It protects the bank, not you, if you default on your loan and the property sells for less than what's owed. But it's the borrower who foots the bill.
The cost of LMI depends on the loan size and the conditions of the lender.
As an example, the median house price in Australia was $905,760 in July, according to Cotality.
To simplify the calculation, let's round the property value down to $900,000, and round both the deposit and LMI to the nearest thousand. Based on this, here's an estimate of what you might pay in LMI:
LMI is typically paid upfront or added to the loan. However, the latter option means you'd have to pay interest on it adding thousands of dollars more in the long run.
Even though you're paying for the bank's protection, LMI can be seen as a tax on time, helping buyers get into the market sooner with a smaller deposit.
A recent Helia report found that nearly half (48%) of recent buyers used LMI to purchase a home, and younger Australians are the most likely to consider it.
Which jobs qualify for an LMI waiver?
Not all lenders offer LMI waivers, and even among those that do, eligibility varies. Some job-based waivers are only available through mortgage brokers. Others aren't advertised at all.
Some professions commonly granted waivers include:
Medical: Doctors, dentists, nurses, physiotherapists, pharmacists, veterinarians, optometrists, chiropractors, psychologists
Legal: Lawyers, solicitors, barristers
Finance: Accountants (CPA/CA), financial planners
Emergency services: Police, paramedics, firefighters
Education: Teachers
Engineering and trades: Limited eligibility based on lender
Some lenders also offer higher borrowing limits and discounted interest rates for select professions - but these are assessed case by case.
However, it's not always as simple as: I am a dentist, so I get an LMI waiver.
According to a blog by mortgage brokerage Ausfirst Lending, ANZ are "picky" about what medical specialities apply, while Macquarie Bank only wants "the cream of the crop."
"Think established specialists, not fresh graduates."
What lenders offer the best job-based perks?
According to Ausfirst Lending, the main players include:
• Big Four: ANZ, CBA, NAB, Westpac (plus St.George, Bank of Melbourne, BankSA)
• Specialists: Macquarie, BOQ, BankVic, Bank First
• Non-banks: Granite Home Loans, ubank, People's Choice
Tauriello says CBA's latest change brings it moderately inline with other major banks.
"There are some things that CBA do better than the others, and some things they lack," he says.
For example, NAB already waives LMI for pharmacists with no income threshold.
"Doctors with limited registration are already eligible for LMI waiver with NAB, and Westpac Group has long included interns," Tauriello says.
"The changes for judges and magistrates are fairly standard across the market and represent only a small number of borrowers."
In CBA's favour, they remain ahead of the game by being one of the very few lenders willing to extend LMI waivers to employees of other banks - something most competitors still don't offer.
Is it fair that some jobs get perks and not others?
While the policy is a win for some, it raises questions about fairness.
"These policies are based on the view that certain professions come with strong long-term earning potential, stable employment, and high demand in the job market," Tauriello says.
"These are all factors that make these borrowers statistically lower risk."
Historically, these customers have low default rates and their income is likely to grow significantly over time, putting them in an even stronger position within a few years.
"In that sense, it is fair from a risk-based lending perspective as the bank is backing customers who meet these lower risk criteria."
However, he acknowledges the flip side. "Many hardworking Australians in other industries who may also be excellent borrowers do not have access to these same benefits,"
"Especially because these job-based perks usually extend to investment lending, not just owner-occupied loans. Therefore, it really allows these certain borrowers to leapfrog and build their wealth more than most."
How to pay no LMI even if your job doesn't qualify
If you're not in a listed profession, there are still options.
Of course, there is the traditional method of putting down a 20% deposit. If you don't have enough, consider the bank of mum and dad and see if they get you over the line. However, for many, that's not an option.
Fortunately, if your parents do own property, they could still help out by becoming a guarantor on the loan, which bypasses the need for LMI.
Theres also the First Home Guarantee scheme, which lets eligible first-home buyers purchase with just a 5% deposit and no LMI.
From next year, changes to the scheme will remove income caps and increase property price limits - potentially helping to close the gap between job-based perks and broader affordability.
"Ideally," says Tauriello, "we'd see waivers extended to more in-demand roles and strong applicants, striking a balance between responsible lending and giving more Australians a fair shot at home ownership."
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