Lenders Mortgage Insurance

The Biggest Fee For Your Home Mortgage

Calculating LMI PremiumPeople who have not been affected by the housing market crisis in Australia may now be looking for the opportunity to purchase a home. Because of the global market downturn, property values and home prices have dropped throughout the world.

This means that there are big gains to be had for those people who can afford to purchase a home. However, when you find your home, there are a few things you should remember before jumping in to a mortgage head first. There are a few fees that are associated with your mortgage other than the monthly payment. For those who have a small deposit and need to borrow money from a lending institution, he or she will most likely have to pay lender’s mortgage insurance.

What is Lender’s Mortgage Insurance?

Lender’s mortgage insurance, or LMI for short, is a fee charged by the lender of funds in home loans. This fee is used to help protect the lender’s interest in the loan. For instance, if you have borrowed $200K and could not end up affording that amount, you would default on the loan.

The lending institution would not only be losing the actual loan itself, but all associated costs for originating and closing the loan. Therefore, borrowers are charged an upfront fee to help off-set any costs associated with a loan in default.

Do I Need It?

The answer is both yes and no. For those individuals who can afford a certain down payment on their loan, usually over 20%, he or she does not always have to pay an LMI premium. LMI is based upon one’s risk assessment for loan repayment. For example, those who only have a minimum down payment, possibly 3%, are considered high risk because he or she has not been able to save a significant portion of money for their purchase.

Oppositely, those who have a large down payment available and a solid job history may get the LMI fee waived. This is up to the discretion of the lending institution. Also, one should keep in mind that LMI insurance does not cover the borrower (home owner). This insurance is paid by the home owner as a requirement by the lender. Some loans that may require LMI would be:

- Property Investment Mortgages
- Construction Mortgages
- Owner/Occupier Mortgages

Please note that if you are making interest only repayments then some mortgage insurers will load your premium. As your loan will not be reducing over the term, there is a higher risk to the insurer and so a higher premium is charged.

What is the Cost of LMI?

When a lender starts to talk about fees, many home owners get a nauseous feeling in their stomach. One of the most feared sounds is that of the calculator adding document fees, attorney fees, LMI fees, and all other costs associated with loan approval that makes the ribbon on the adding machine sing.

However, LMI does not carry the unpredictability as other fees because it has been government regulated. LMI fees depend on the amount of the home loan, how much money was put down, and the length of the loan itself.

One of the leading providers in Australia for LMI is Genworth Financial. Genworth Financial can provide its customers with the purchase of LMI and help with the many other aspects of home mortgages. You cannot choose if your lender uses Genworth LMI or QBE LMI, however you can apply with a lender that uses these particular insurers, thus ensuring you get the lowest possible premium.

Discounts for doctors: special rates on home loans

Are you a doctor, accountant or lawyer? Have you finally found that dream home that you want to finance? Applying for a home loan can often be complicated process with multiple requirements. Most individuals that are able to secure the loan end up with high fixed interest rates that make paying off the loan amount exceedingly difficult.

However, if you’re a professional some of the conditions for approval may not be applicable and the requirements are often relaxed by lenders. Further, you may be eligible for discounted interest rates.

The right mortgage broker can help you to apply with the most suitable lender possible, to ensure that you receive the best package around!

If you work in the medical industry or practice as a doctor, dentist, physiotherapist, radiologist, osteopath, psychiatrists or other, you may be eligible for the Medico Package Discount. However, not all professions are included, so it is advised that you check with the banks first.

Being a medical professional means that your employment is stable and you have a high earning potential. Consequently, the banks view you as being low risk and are more willing to lend, in addition to offering attractive loan packages for those that choose to take up a loan with that particular lending institution.

Doctors are particularly favoured by lenders, due to their high income and statistically the profession with the lowest default rate, no matter if they are employed through a government hospital, if they are in private practise of if they are a specialist. Accordingly, they are able to manage their finances and often later apply to the banks for additional sums to finance other investment purchases. Thus banks view medical professionals as important and valued clients.

Fitting into this category means that the Lenders Mortgage Insurance applicable when securing the loan, may not be payable. Further, you may automatically be able to receive a sizeable discount of 0.7% below the Standard Variable Rate (SVR) of the bank! This adds up to savings of thousands of dollars!

To make sure that you satisfy all criteria to receive these discounts, its best to apply with the right mortgage broker. Generally, you must not be borrowing above 80% of the LVR and the amount you are borrowing must be over $500,000. Larger amounts will receive more generous discounts.
When applying for this package, it is also essential that you have a clear credit history. There may be other criteria that you need to satisfy, so it is always best that you check with your lender first.

However, the most important thing is that you contact the right broker. Regardless of the strict guidelines or the low amount that you may be borrowing, your broker may know of special rates that you may be eligible for as a professional. To ensure that you receive the best package around, ask your mortgage broker about home loans for doctors!

Display home designs

Female designers viewing a home being builtThe first place to start when building a home is by viewing some existing homes and looking at the way they are designed. What do you like? What don’t you like? Get a feel for what kind of design you need and in particular, what catches your imagination.

By viewing some display homes you can then get a feel for what modern options are available. They are usually found in new estates or in areas of new land releases where there will be construction of new homes by developers. The display home is an example of what can be built in this area and is in place to give prospective buyers an actual feel of what is available.

A display village is like a new car dealership for homes, and has for viewing all the types of houses that can be built for varying land sizes, needs & budgets. This allows you to actually walk through what can be built rather than try to imagine a house from looking at drawings and architectural plans. So if you have vacant land already and want to do some research a display is a good start to have a real feel of what you are going to live in.

What should you look out for with your display home?

Remember a display home is marketing tool by the builder, so when walking through one it may seem like the perfect place for you to live in, but you must ask a few questions and make sure that the home is suited to what you require. Try to keep in mind the following:

  • The initial price is the basic building cost without the added extras. So always be prepared to pay more than what is originally quoted as curtains, tiles etc is not part of the basic package.
  • Does the floor plan fit my family requirements?
  • The house I am picking how it will fit on the land and how it will look?
  • Bathrooms & toilets are there enough? Is there too many?
  • Sunlight in the morning or afternoon? Where are the windows? Which way is North / South?
  • Think about landscaping, driveway, fencing, tiles, kitchen, air conditioning.
  • Basic floor plans are not expensive but changes to any floor plans incur costs so look at as many floor plans and find the one that is best suited to you.
  • Flipping the house plan meaning changing the whole arranging by 180 degrees will incur a cost.

When looking at display homes always have additional funds for a rainy day. Nine times out of ten some unexpected further costs pop up, unless you are prepared you could get into a very messy financial situation. Make sure that everything is documented with the builder, make sure that you are happy with the layout and can imagine every room you are walking through. If you get the design right then you will have plenty of equity from day one!

There will be many stories of buildings gone wrong regarding display homes, but when there are thousands of homes built each year, there are always going to be a few disaster stories and this can be due to the client not being on top of things or sheer bad luck. As a consumer you will have a lot of protection from any issues that can arise with constructing your home there are building commissions in each state which will have information to assist you and protect you.

We recommend that you get quotes from 2 – 3 builders before choosing the one that will work for you. Ask them for a list of past customers that you can call and find out how punctual the builder was, if the price changed & how well they cleaned up after the job was done.

Good luck with your dream home!

About the Author

Otto is a Mortgage Broker that has specialised in financing display home loans via the major banks for over 7 years. His company the Home Loan Experts is now one of the top home loan broking firms in Australia.