Commonwealth Bank Expands LMI Waiver for Aussie Workers in Home Loans – Money Advice Experts in Services

Commonwealth Bank, one of Australia’s leading financial institutions, has initiated a significant change in its home loan offerings, particularly benefiting certain Australian workers. The bank has introduced an expansion of its Lenders Mortgage Insurance (LMI) waiver program, aimed at enabling a broader range of professionals to qualify for this benefit when applying for home loans.

This innovative move by Commonwealth Bank involves extending the LMI waiver to various occupations, including paramedics, police officers, firefighters, and nurses. Traditionally, the bank had limited this waiver to individuals in higher-income roles such as those in the medical, legal, accounting, and finance sectors. Lenders typically impose LMI on borrowers who do not possess a 20% deposit, with the cost of this insurance often amounting to significant sums.

A spokesperson from Commonwealth Bank confirmed that the institution is currently testing the expansion of its LMI waiver policy on a trial basis. The duration of this trial period remains undisclosed. Loans under this new policy will be evaluated on a case-by-case basis, ensuring compliance with the Australian Prudential Regulation Authority’s (APRA) guidelines through rigorous credit assessments and responsible lending practices.

This initiative covers individuals seeking owner-occupied properties and refinancing options with principal and interest repayment structures. Notably, this development follows a recent announcement by another major bank, NAB, regarding the extension of its LMI waiver to additional professions, including accountants, lawyers, and a wider range of medical professionals.

LMI is a one-time premium that is non-refundable and non-transferrable, typically added to a home loan for borrowers with smaller deposits. The exact cost of LMI is calculated based on the property’s value and the borrowed amount, with a higher upfront contribution resulting in lower insurance expenses. For instance, for an average $850,000 home with a 10% deposit, the LMI cost could reach $18,819, escalating to $33,935 with a 5% deposit. Similarly, for a $650,000 unit, the LMI fee might amount to $14,391 with a 10% deposit and $25,950 with a 5% deposit.

All major banks in Australia, including Commonwealth Bank, Westpac, NAB, and ANZ, offer LMI waivers to specific professional groups based on varying criteria. These exemptions typically target high-income earners such as lawyers, doctors, and accountants. In a controversial move last year, ANZ announced a policy allowing individuals in affluent neighborhoods to borrow up to 95% of a property’s value without incurring LMI charges.

This strategic decision by Commonwealth Bank reflects a proactive approach to support a broader spectrum of workers in achieving homeownership, aligning with the evolving needs of the housing market and economic landscape in Australia.

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