With interest rates and the cost of living increasing, many borrowers are looking to make savings on their mortgages. For some, this may simply be a matter of looking at their job title. A majority of the major Australian banks classify some professions as ‘lower risk’, which may entitle eligible borrowers to special discounts.
Which professions qualify for home loan discounts and benefits?
‘Lower risk’ professions are classified as such because their work is considered more stable and potentially higher incoming earning, with more demand for employment and therefore less of a financial risk for banks.
The list of occupations that qualify as ‘lower risk’ varies between lenders, however, the following is a list of those that commonly meet the criteria:
- Medical professionals and allied health professionals: Medical/General Practitioner, Anaesthetist, Cardiothoracic Surgeon, Chiropractor, Clinical Pharmacologist, Cosmetic Surgeon, Dental Practitioner, Dermatologist, Ear and Throat Surgeon, Emergency Surgeon, Endocrinologist, Gastrointestinal Surgeon, Gastroenterologist, Gynaecologist, Haematologist, Immunologist, Nephrologist, Neurosurgeon, Neurologist, Obstetrician, Oncologist, Ophthalmologist, Optometrist, Oral and Maxillofacial Surgeon, Orthopaedic Consultant, Otolaryngologist, Paediatric Surgeon (neonatal and perinatal), Pathologist, Pharmacist, Physiotherapist, Plastic Surgeon, Podiatrist, Psychiatrist, Psychologist, Radiographer, Radiologist, Reconstructive Surgeon, Respiratory or Thoracic Surgeon, Sonographer, Speech Pathologist, Urologist, Vascular Surgeon, Veterinary Practitioner
- Professional services: Accountant, Actuary, Auditor, Chief Financial Officer, Finance Director, Finance Manager, Financial Controller or Partner, Lawyer, Solicitor, Barrister, Judge
- Eligible sports professionals: Professional athlete (all sports), professional coach (all sports), and retired athlete still working within the sports or entertainment industry
- Eligible entertainment professionals: DJ, Actor, Musician/Singer/Composer, Model, Photographer/Film Maker, Journalist, Presenter, Commentator, Producer, Director, Writer/Author. Note: To be classified as a Professional Sports and Entertainment Person, the talent must have an accredited Manager, Agent or Accountant.
What home loan discounts or benefits are offered?
If your profession falls into one of these eligible categories, you should be able to obtain a waiver on Lenders Mortgage Insurance (LMI). LMI provides security for the lender, if a borrower defaults and the lender is unable to recoup the loan amount from the sale of the property. LMI is calculated as a percentage of the loan amount and varies depending on the Loan to Value Ratio (LVR), so can come at a considerable cost to the borrower.
For example, an eligible medical professional may be able to borrow 90 to 95 per cent of value of a property without incurring LMI, whether the loan is to refinance or purchase as either an owner occupier or investor. This represents a potentially significant saving and greater flexibility in the price range of properties they might consider purchasing.
What are some home loan eligibility criteria?
‘Lower risk’ category eligibility varies, depending on the lender and industry. Some examples of criteria and conditions which may apply include:
- Maximum borrowing thresholds
- Minimum income thresholds
- Evidence of registration via Australian Health Practitioner Regulation Agency (AHPRA)
- Evidence of registration to practice as a CA, CPA, CFA or FIAA in Australia
- Verification of registration to practice law in Australia, through evidence of the Practising Certificate issued in Australia
- Professional sport and entertainment contracts must be considered equivalent of full-time employment contracts
- Standard lending eligibility criteria and loan servicing requirements*
*Some restrictions on interest-only repayment terms and established vs land/construction may apply. In some cases, the target client must be able to meet Premium or Private Bank criteria to be considered under the waiver.
How to access home loan perks
Simply holding a certain job title or profession when applying for a loan doesn’t automatically qualify you for an LMI waiver. Rather, if you believe you may qualify as ‘lower risk, you will need to request the waiver from your lender. Like most lending matters, the decision will be subject to credit approval along with the balance of your loan application.
An example of the impact of LMI can be seen in the following:
| Purchase Price | $900,000 |
| Loan Amount | $810,000 |
| Loan to Value Ratio | 90% |
| Applicable LMI |
$23,546* *Note: LMI rates vary between lenders and locations – this is an example for illustration purposes only. |
|
Loan amount with LMI included $833,546 Loan amount if LMI waiver applied $810,000 In this scenario, the upfront loan savings equate to $23,546 when the borrower qualifies for an LMI waiver. |
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As LMI is added to the loan amount, not only does it increase how much you are borrowing upfront, it increases the amount of interest charged and therefore your repayments. Over the life of a loan, an LMI waiver may result in significant total savings in interest repayments.
If you’d like to find out more about ‘lower risk’ professions or other ways to potentially save on your mortgage, please get in touch with one of the BDO Finance Solutions team.
Matthew Laming is an authorised credit representative 478711 of BLSSA Pty Ltd (ACN 117 651 760) Australian Credit Licence 391237. BDO Finance Solutions (SA) Pty Ltd Corporate Credit Representative Number 478582. Aggregation services provided by Choice Aggregation Services. © 2022 BDO Finance Solutions (SA) Pty Ltd. All rights reserved. Your full financial needs and requirements need to be assessed prior to any offer or acceptance of a loan product.