How an LMI waiver can save you $20k and cut years off your investing journey
A little-known lending policy could shave years off an investor’s property journey and put $20,000 back in their pocket.
In the latest episode of The Property Nerds podcast, InvestorKit’s Arjun Paliwal, Fouracre Financial’s Jack Fouracre, and InvestorKit senior portfolio strategist Adrian Lee unpack the costly burden of Lenders Mortgage Insurance (LMI) and how some professionals are eligible to sidestep it altogether.
Typically charged when a buyer has less than a 20 per cent deposit, LMI can add $12,000 to $20,000 to a $600,000 property purchase. However, many professionals, from lawyers to pilots, and even media personalities, may be eligible for LMI waivers that allow them to borrow up to 95 per cent without paying a cent in insurance.
According to Paliwal this waiver could “save anywhere between three to five years, if not longer, on your investment journey – based on some of the mapping we’ve done in the past”.
In particular, many health services professionals may be eligible without even realising it.
“There’s what’s called a medico policy where you have LMI waivers that go up to 95 [per cent]”, Fouracre said on the podcast. “You’ve got people that might not know they have access to it like nurses or midwives. You’ll be very surprised.”
These exemptions, often available through what’s called a “professional package”, are offered by a range of lenders and can dramatically cut upfront costs. But it’s not just about saving money, it’s also about timing.
The guests highlighted the real cost of delaying a purchase to save a full 20 per cent deposit, noting that in the two years it might take to save an extra $48,000, a $600,000 property could rise $60,000 in value.
However, Paliwal warned that for professions without the LMI waiver, getting on the property ladder sooner is better than waiting as you “would bring forward your portfolio plan … even if you paid LMI”.
For those who don’t qualify for LMI waivers, alternative pathways remain. Government-backed low-deposit schemes for first home buyers and single parents offer access from as little as 2 per cent. Guarantor loans, too, are gaining traction, allowing borrowers to finance 100 per cent of the purchase and cover extras like stamp duty and buyer’s agent fees.
“You’re just borrowing the full amount,” said Fouracre. “Some people even hold onto their deposit and use the guarantor route to buy a second property.”
The trio also touched on trust structures for serious investors. By purchasing through a trust, investors can preserve personal borrowing capacity and unlock tax efficiencies – particularly valuable for those planning to acquire multiple properties or retain flexibility for a future principal residence.
To listen to The Property Nerds podcast here.