With banks and lenders upping the ante to offer the most competitive deal they can, borrowers now have the chance to borrow more than 80% of a property’s purchase price, and avoid paying lenders mortgage insurance (LMI).
Sound too good to be too? That’s understandable – after all, LMI is typically payable on any mortgage that is worth more than 80% of a property purchase price, to protect the lender in case you default on your loan.
However, with banks, building societies and credit unions currently fighting for market share, lenders are coming up with “out of the box” solutions for attracting A-list borrowers.
Citibank has put its best foot forward by waiving the cost of LMI for loans up to 85% loan to value ration (LVR), which is sure to win the bank a slew of new customers.
“Citibank’s 85% no LMI offer is the best offer in the market for avoiding the cost of LMI,” confirms mortgage broker Medine Simmons from mfsimmons.com.au.
“The Citibank offer is available on all their loan products, meaning borrowers can obtain an 85% loan without paying any LMI or going through any additional LMI assessment. There is nothing special for the applicant to do.”
It goes without saying that this type of offer is only available to high quality, low risk borrowers known as “vanilla” applicants in the industry: that is, borrowers who are employed full time in secure, long term jobs, with a stable housing history, evidence of genuine savings and no black marks against their credit file.
For those who are seeking a break on LMI, but who don’t have such a squeaky clean credit history, don’t give up just yet.
Simmons has a lender on her books who is currently offering borrowers up to 90% LVR with no LMI payable – but there are some strings attached.
“There’s a lot of fine print for this offer I’m afraid. It’s aimed at the non-conforming market, for people who want 90% but don’t meet LMI criteria – say, they have a default recently,” she explains.
“So the lender takes on the risk and charges a lending fee that is more expensive then LMI, and an interest rate about 9.5%. It would work for a certain market, but for most people, it would be better to pay normal LMI and get the sensational rates on offer at the moment.”