How to Get a 90% Loan and Save Nearly $40,000 on LMI
Case Background
Our recent clients, a married couple with no children, were looking to buy their first home. The wife is a registered nurse working at a local medical center. Two years ago, they applied for the 887 visa and recently received their visa grant letter.
Over the years, they have saved $220,000 and want to purchase a high-quality owner-occupied property. After thorough research, they found a $1.5 million property that suits their needs.
Case Challenge
With only $220,000 in savings, the couple planned to use $150,000 as a deposit, which meant their deposit ratio was 10%, and their Loan-to-Value Ratio (LVR) was 90%.
At this LVR, banks typically require borrowers to pay Lenders Mortgage Insurance (LMI), adding a significant cost to their home purchase.
Challenge Discussion
In most cases, if a borrower's deposit is less than 20% of the property’s value, they must pay LMI. For this $1.5 million property, as first-time homebuyers, the estimated LMI cost was around $40,000, a substantial extra expense.
If they had to pay this LMI, their savings wouldn’t be enough to cover both the deposit and additional costs like stamp duty.
Solution
To address this, we introduced the couple to Westpac’s LMI Waiver Policy. Under this policy:
- Eligible registered nurses earning a gross salary of at least $90,000 per year
- Can secure a loan with only a 10% deposit
- Without having to pay LMI
Since the wife is a registered nurse earning over $100,000 per year, she met the eligibility criteria. This allowed them to avoid paying LMI completely, saving them nearly $40,000 in upfront costs.
Final Outcome
We successfully submitted their loan application to Westpac, utilizing the LMI Waiver Policy to eliminate their LMI costs. Their $1.35 million loan was approved, allowing them to purchase their dream home without the financial burden of LMI.
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