Nurses and midwives may be eligible for a home loan with a 10 per cent deposit without paying lenders mortgage insurance. This could save you tens of thousands of dollars on the cost of your home.
Financial institutions tend to classify healthcare as a low-risk industry, and for a long time have viewed certain healthcare workers as desirable clients, less likely to be out of work and thus less likely to default on a loan. Banks would offer incentives to attract and retain these workers as customers.
Traditionally, these workers were doctors. Recently, some lenders have begun extending select incentives to nurses and midwives as well.
Most commonly, this involves waiving lenders mortgage insurance (LMI) for nurses and midwives.
What is lenders mortgage insurance?
Generally, banks require 20 per cent of a property’s value as a deposit. For anything less, they impose LMI: this is an extra fee charged to borrowers deemed higher risk; essentially, it is insurance in case the borrower defaults on the loan.
The LMI premium is non-refundable and one off, but is typically added to the total cost of the loan, resulting in higher ongoing repayments.
Exactly how much the LMI premium is will be calculated as a percentage of the loan amount versus the deposit, and sometimes other factors including whether or not you will also be applying for the First Home Owners Grant. It can be a significant amount.
Example
Sunny is looking to purchase a $600,000 house. Sunny would need to have saved a deposit of $120,000 to avoid paying LMI on her mortgage. If she has got a deposit of $60,000, she could be liable for an LMI fee of almost $10,000.
But if Sunny is a nurse or midwife with a $60,000 deposit, she may be able to avoid the LMI fee. This means Sunny will be spending less up front and less over the course of the loan.
Are there any other incentives?
Some lenders may offer nurses and midwives discounted interest rates, compared with the market rates, as part of a professional package as long as the total loan amount is more than $250,000.
Am I eligible?
Most lenders who offer such incentives to nurses and midwives will require you to have a before-tax salary of at least $90,000pa. Some will allow you to include up to 100 per cent of your overtime, penalties and allowances for the purposes of assessing your annual salary.
Note: this information is general in nature. You should seek independent financial advice to discuss your specific financial situation.
