A major bank has announced that home buyers only need to pay $1 in Lenders Mortgage Insurance (LMI) if they are borrowing 85% of the property value.
This offer for first home buyers is effective from 13 July 2020.
One of the pain points for many first home buyers has also been saving for a deposit.
With the $1 LMI offer, first home buyers can buy their property sooner by reducing the expense of LMI and saving thousands of dollars.
What is the eligibility criteria?
To be eligible for the $1 LMI offer:
- You must be a first home buyer.
- If it’s a joint application, one of the applicants must be a first home buyer.
- The maximum loan size is $850,000 with a LVR of 85% at the time of home loan approval.
- Only one property is financed per application.
- Owner-occupied property with principal and interest repayment. (Interest only repayments are not allowed)
- There is no income cap for eligible applicants so no need to rush to lodge your tax returns.
The offer is not available for:
- Investment loans
- Construction loans
- Portfolio loans
- Cannot be used with a guarantor loan.
- Refinancing
What is Lenders Mortgage Insurance?
Lenders usually charge an LMI fee if you’re borrowing over 80% loan to value ratio (LVR) to protect them in case a borrower defaults on their home loan.
To avoid paying LMI, a 20% deposit is required.
With the $1 LMI offer, if you’ve saved a 15% deposit and meet the eligibility criteria, then you only pay $1 for LMI.
For instance, if a first home buyer wanted to buy a property valued at $1 million and has saved $150,000 deposit, an LMI fee of approximately $21,465 has to be paid.
With this offer, you only need to pay $1 in LMI fees, saving you approximately $21,464.
Please note that this is not an LMI waiver. A $1 LMI is charged and is subject to LMI approval.
