Medical professionals play a crucial role in the wellbeing of our country. Because of this, it is appropriate that these individuals enjoy significant benefits in their personal and professional lives. When it comes to home loans, medical professionals have a few key benefits available to them. More particularly, they are exempt from paying Mortgage Insurance and are required to pay lower deposits on their home loans. This makes purchasing property more feasible, whether it’s to live in, or as an investment opportunity. In this article we’ll cover both benefits, and explore how medical professionals are able to purchase property significantly quicker than they thought they could.
What Is Lenders Mortgage Insurance (LMI)?
When a lender offers an individual a loan to purchase a property, they take on the risk of the individual borrowing the money defaulting on their mortgage repayments. Lender mortgage insurance exists to protect the lender against the risk of not being able to recover the outstanding loan balance from an individual who is not able to repay it.
When an individual takes out a home loan they are required to pay Lenders mortgage Insurance if they have a deposit of less than 20%. This 20% deposit exists as surety for the person lending the money, in the event that the individual borrowing it defaults and is unable to pay back the loan, or a portion of it. The amount would then be paid to the lender to cover the property’s depreciation costs. An LMI premium is a one off payment that can be paid immediately or be added to the loan amount and paid off over its duration. Most people will wait to save this amount before they pursue a home loan so that they are able to pay it should they default on their home loans. However, because medical professionals are less likely to default on a mortgage, LMI is waived and they are able to proceed to apply for a loan without having to consider that cost. This has two significant benefits, which we will cover below. But first, we should understand how this waiver is possible.
Why do medical professionals receive a mortgage insurance waiver?
This decision is based on how likely a particular lender is to default on their home loan. Medical practitioners are considered highly professional individuals and are therefore classified as low risk borrowers. This is based on the fact that they earn a stable income, and fall within a higher bracket than other professions. There is also the fact that medical professions require many years of studying, which means there is a significant commitment from an individual to pursue a career. Because of this, they are less likely to change their career to one that offers a lower salary. In addition, there is a consistent need for medical professionals, meaning that a medical professional’s income is usually consistent and dependable. All of these factors result in medical professionals being classified as low risk borrowers, and subsequently, are exempt from paying mortgage insurance because they are significantly less likely to need it.
Purchasing property sooner
There is the most obvious benefit of significant savings. As mentioned, an LMI premium can represent a substantial amount of money. For example, if someone was buying a house worth $500,000 and had a $50,000 deposit, they would have to pay an LMI of approximately $8,600. As a medical professional, you are not required to pay this premium.
Lower deposit requirements
Another considerably advantageous benefit for medical professionals looking to take out a home loan is that they are required to pay a lower deposit than most other professions. While most lenders require individuals to pay at least 20% of the property value, medical professionals are only required to pay a deposit of 5% to 10% (or even less) of the property value.
These factors combined result in medical professionals being in a more financially favourable position to take out a home loan earlier in their careers. Subsequently, it means that they might also be more likely to buy further properties in the future, since both factors remain active no matter how many properties a medical professional decides to purchase.
Partnering with professional brokers
Considering the significant financial benefits, Medical professionals are in an ideal position to purchase properties both for living and investment opportunities. Melbourne Finance Services has years of experience in offering financial support to medical professionals looking to purchase property.
We offer our clients flexible hours, with the understanding of how busy medical professionals can be, as well as step-by-step strategies to guide you through every step of the process. Our brokers have over 20 years of experience, and pride themselves on getting to know you personally so we can help you identify both your short and long-term goals. We have strong partnerships with various reputable lenders in Australia, and aim to help you secure the perfect home loan, while ensuring that all the details are taken care of. So you can focus on what you do best – help the people of our beloved country.