If a buyer has less than a 20% deposit, they will likely meet LMI. It’s an insurance premium paid by the borrower to protect the lender in case of default. Yes, the borrower pays the premium, but the bank gets the payout. Life isn't always fair, but we know how to navigate it.
How to Dodge the LMI Bullet
LMI can cost tens of thousands of dollars, but there are ways to avoid it:
- Guarantor Loans: Using a family member's equity as security.
- Professional Waivers: If the applicant is a doctor, accountant, or lawyer, some banks will waive LMI even with a 10% deposit because they are deemed "low risk" professionals.
- First Home Guarantee: The Australian government has schemes that allow eligible buyers to get in with as little as a 5% deposit while they act as the "guarantor," effectively skipping the LMI bill.
Disclaimer: The information provided in this blog is general in nature and does not constitute personal financial or credit advice. Please contact chawlafinance.com.au so we can discuss your scenario in detail.