Home Loans for Teachers in Australia: No LMI Required

Teachers in Australia work hard to shape the minds of future generations, but when it comes to buying a home, they can face the same financial challenges as anyone else. Fortunately, there are special home loan offers tailored specifically for teachers, including opportunities to avoid Lenders Mortgage Insurance (LMI) – a common hurdle for many homebuyers. In this article, we will explore what LMI is, how teachers can access home loans without it, and what benefits are available for educators in Australia.

How Much Can You Borrow as a Teacher?

When it comes to securing a home loan as a teacher, there are several options available, which will affect how much you can borrow. Choose the one that best fits your personal situation from the choices explained below.

Borrow Up to 90% of the Property Value with No LMI

This option is particularly popular with teachers. A 10% deposit is generally manageable, and avoiding Lenders' Mortgage Insurance (LMI) can save you tens of thousands of dollars in upfront costs. Most lenders don’t require a minimum income to borrow 90% of the property’s value without LMI. This option applies to residential properties, which can be used as either a Principal Place of Residence or an investment property.

Borrow Up to 98% of the Property Value (First-Home Buyers Only)

First-home buyers can borrow up to 98% of the property value, with LMI included in the loan. This means you’ll need a 5% deposit, and you can borrow 95% of the property’s value, plus up to 3% for LMI, which is rolled into the loan amount. 

Borrow Up to 110% of the Property Value

If you have a guarantor, you may be able to borrow up to 110% of the property value. This covers not just the property cost but also additional expenses like stamp duty and solicitor fees. This is a great option for first-time buyers as it eliminates the need for a deposit and exempts you from paying LMI, saving you a significant amount.

A guarantor uses the equity in their property as security for part of your loan, making this high financing possible. However, this setup comes with risks. If you fail to make your mortgage repayments, your guarantor’s property could be at risk. They might have to cover the repayments or even face foreclosure. Both the borrower and guarantor should understand the potential consequences and seek financial advice before proceeding.

Get Free Advice for Your Teacher Home Loan

Applying for a home loan and understanding which lenders offer LMI waivers can be confusing. Our suggestion is to speak to a mortgage broker who is experienced in teacher home loans. Eden Emerald Mortgages is our top choice - they specialise in home loans for teachers, and can answer all your questions, guide you through the process, and negotiate the lowest interest rates.

Eden Emerald Mortgages' services are completely free of charge, and we have used Shaun ourselves, and can attest to his wealth of experience and knowledge.

Do Lenders Consider Overtime When Calculating Income?

Yes, lenders do consider teachers' overtime when calculating income for home loans, but how much of it is included varies by lender. Typically, lenders count about 80% of overtime income to account for fluctuations in overtime hours. Teachers who regularly take on extra duties like tutoring or extracurricular activities may have a stronger case for including this income, provided they can demonstrate consistent overtime over at least 6 to 12 months.

Lenders also evaluate the reliability and regularity of overtime income to ensure it is likely to continue. To include overtime in your home loan application, you’ll need to provide clear documentation, such as payslips or employment contracts, as evidence of consistent overtime earnings.

What If I Am a Casual Teacher?

As a casual teacher, qualifying for LMI waivers can be more challenging, but it’s not impossible. Casual employment is common among new or part-time teachers, and lenders often take a more cautious approach when assessing casual income compared to permanent and fixed-term contracts.

To determine your borrowing capacity, lenders usually annualise your year-to-date income but account for only about 40 weeks of work per year instead of 52, assuming time off during school holidays. If you’ve been working in a casual role for at least 3-6 months and can provide three months’ worth of payslips showing consistent income, some lenders may still consider you for an LMI waiver.

Teaching is generally viewed as a stable profession, so some lenders may be more flexible with casual employees in this field. The key is to demonstrate consistent earnings and secure employment, even in a casual capacity. Partnering with an experienced mortgage broker who specialises in home loans for teachers can significantly improve your chances of approval.

Which Teachers are Eligible for LMI Waiver?

You don't have to be a teacher to be eligible for no LMI home loans. Take a look below to see some of the positions that can access teacher home loans:

• High school teachers
• Primary school teachers
• School principals
• University lecturers
• University tutors
• TAFE teachers
• Child care workers
• Special needs teachers
• Trainers (within a professional capacity and related to Education)
• Student studying Education or Teaching
• Employees of the following organisations:
  • Government Schools (Primary, Secondary, Specialist)
  • Non-Government Schools (Primary, Secondary, Specialist)
  • Catholic Schools
  • Universities
  • TAFEs
  • Preschools and Kindergartens
  • Child Care Centres
  • Family Day Care Australia
  • Education Unions
  • Department of Education and Training
  • Private Colleges

What Is Lenders Mortgage Insurance (LMI)?

Lenders Mortgage Insurance (LMI) is a fee imposed by lenders when a homebuyer borrows more than 80% of the property's value. The purpose of LMI is to protect the lender in case the borrower defaults on their mortgage. For most homebuyers, this fee can range from a few thousand dollars to tens of thousands, depending on the loan size and deposit.

For many buyers, saving a 20% deposit to avoid LMI can be a significant challenge, especially in Australia's competitive housing market. However, certain professions, such as teachers, are often offered exemptions from LMI requirements, making it easier for them to get onto the property ladder with a smaller deposit.

LMI Waivers for Teachers

One of the key benefits for teachers applying for home loans is the possibility of an LMI waiver. Some lenders in Australia offer LMI exemptions to eligible teachers who don't have a 20% deposit. These waivers can significantly reduce the upfront costs of purchasing a home.

To qualify for a no-LMI home loan, teachers must meet specific criteria. Generally, these include:

• A stable teaching position: Lenders typically require that the applicant is a registered teacher with permanent employment of at least 6-12 months.
• Loan-to-value ratio (LVR): Lenders may waive LMI for teachers and allow them to borrow up to 90%.
• Strong credit history: A good credit score is essential to qualify for a no-LMI loan.

Which Lenders Offer No LMI Home Loans for Teachers?

There are only a small number of lenders that offer LMI waivers for teachers, such as Bank First. It's worth consulting with a mortgage broker who specialises in teacher home loans. They can tell you which lenders offer the best deals, and find the right loan for your situation.

How Does LMI Waiver Benefit Teachers?

Avoiding LMI can save teachers tens of thousands of dollars, allowing them to purchase a home sooner without having to save a full 20% deposit. In a market where home prices are steadily rising, this can be a game-changer. Here are some of the key advantages of no-LMI home loans for teachers:

1. Lower upfront costs: Teachers can save a significant amount of money by avoiding LMI, reducing the financial strain of purchasing a home.
2. Smaller deposit requirement: Without the pressure of saving for a 20% deposit, teachers can secure a home loan with as little as 10% (or sometimes less) of the property value.
3. Access to competitive interest rates: Many lenders offer favourable interest rates to teachers, often with added perks such as discounted fees or flexible loan features.
4. Faster homeownership: By reducing the need to save for a large deposit, teachers can achieve homeownership more quickly, which is especially beneficial in rising property markets.

Additional Benefits for Teachers

Aside from LMI waivers, teachers in Australia may be eligible for other benefits when applying for a home loan:

• Discounted fees: Some lenders reduce or waive loan establishment and ongoing fees for teachers.
• Flexible loan features: Teachers may be offered flexible repayment options, such as offset accounts, redraw facilities, and the ability to make extra repayments without penalties.
• Support for first-time buyers: Teachers may also be eligible for the First Home Owner Grant (FHOG) and stamp duty concessions, depending on the state they’re purchasing in.

Final Thoughts

If you’re a teacher in Australia, purchasing a home is more achievable thanks to home loans designed specifically for educators. LMI waivers can save you tens of thousands of dollars, and other exclusive offers help lower the cost of buying a home. By taking advantage of these benefits, teachers can move into their dream home sooner without being weighed down by LMI fees.

When considering a home loan, it’s essential to compare offers from different lenders and consult with a mortgage broker who understands the unique financial needs of teachers. Eden Emerald Mortgages is voted the #1 mortgage broker by the Canberra Times, and they specialise in home loans for teachers. Get in contact with them to see how they can help you secure your home loan with no LMI.