Being a doctor, or any kind of medical professional, has significant benefits. You are seen as a well-respected member of the community, as well as having the opportunity to make a positive impact of the health of patients.

Depending on the field you practice within, you may even be able to contribute to the development of medical science – and the salaries can be well above average in certain fields too.

One thing that is less understood are the benefits that exist for medical professionals when applying for a home loan. Let’s take a look at what these can be.

LMI Waivers

Most people who take out a mortgage in Australia must pay Lenders Mortgage Insurance (LMI), which is a kind of insurance policy for the lender if you were to default on the loan.

Unless the borrower is putting down a 20% deposit – not easy these days with the average house price in Australia reaching $925,000 late last year – it’s very difficult for most people to avoid paying some kind of LMI on a mortgage deal in this country.

One exception to this rule is lending to medical professionals, who are seen as reliable and therefore less risk by the banks, making them more likely to offer incentives to win their business.

Because of this, many lenders are willing to offer LMI exemptions (or waivers as they are known in the industry) for medical professionals seeking a home loan. This can equate to thousands of dollars in savings, as the example below shows:

House Price: $925,000 (the approximate average house price in Australia)

Deposit: $90,000 (just under 10%)

State Applicable: Victoria (note calculations vary from state to state)

Estimated LMI*: $40,615 (based on non-first home buyer status)

*Source: Westpac (https://www.westpac.com.au/personal-banking/home-loans/calculator/stamp-duty-calculator/)

While this example is an estimate and can vary significantly depending on your circumstances, a waiver from the bank for the full amount of LMI (in the above example over $40k) is significant. Bear in mind that LMI fees are generally added to the value of your loan, so you will save paying interest on this amount too.

It’s important to note that LMI fees vary significantly from lender to lender and state to state, and not every lender will waive LMI fees for medical professionals – but some will. The best way to navigate your way through this is often to engage a mortgage broker who has experience securing home lending for your industry.

Getting more for less

While LMI Waivers are the headline saving that doctors and other medical professionals can benefit from, there are others to take into account as well.

One such example is an increased Loan to Value Ratio (LVR), which is the amount you need to borrow, calculated as a percentage of the property’s ‘lender-assessed value’.

Put simply, in the current market banks will allow a higher LVR to medical professionals than many other applicants, mainly due to the perceived lower risk mentioned above.

Typically, a lender will look for an 80% LVR as an ideal loan proposition, meaning the borrower must put down a deposit equivalent to 20% of the property value and the bank will lend you the other 80%.

However, many lenders are willing to increase this to 90% for doctors and even higher for some specialist medical professionals.

What does this all mean for you?

Effectively it means as a medical professional you can borrow more with less, as the bank may lend you a higher percentage of the property than they would for other occupations.

When you add this to the fact that lenders are also like to be more flexible on minimum salary requirements on home loans for doctors and their medical counterparts (again due to a lower perceived risk of default), this is a significant benefit you should be capitalising on.

Commercial benefits

After being in the industry for several years, many doctors and medical specialists may choose to open their own practice.

Once you’ve gone down this route, the general aim is to expand it into a fully-fledged commercial entity to increase the revenue you generate from it.

The problem for many in this scenario is the cost of expansion can be high, with expensive equipment and larger premises the major outlays.

The good news is that, once again, many lenders will look favourably on commercial loans to finance such an expansion for medical professionals.

For example, a retail franchise business can normally borrow up to 70% of an asset (such as their commercial property) to fund expansion plans. Yet for a medical practice, this loan to asset ratio is significantly higher, with some specialist practices managing to secure commercial loans up to 100% of their asset value in recent times.

It’s worth pointing out that these types of loans can be a complex and often need a more in-depth analysis. You can read more about the benefits of commercial lending for medical professionals in our recent blog post here

 As you can see from the above, there are significant advantages for medical practitioners in the Australian property lending market, and it’s worth being across them to make sure you get the best deal available.

Given most doctors and other medical professionals are also time poor and don’t necessarily have the time to research these offers in detail, contacting a mortgage broker to do the heavy lifting can be a prudent move.

It might mean that house you have had your eye on for a while – or getting on the property ladder sooner for younger medicos – is a little closer than you thought if you do.

Loanscope have assisted many medical practitioners to secure finance for property purchases or expanding their practices, and have an in-depth understanding of this specialist market. Contact us for more information on how we can help.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

 

Emmanuel Guignard (MBA)
Director & Principal Mortgage Broker
With over 15 years’ experience in the finance industry and a recently completed MBA in Financial Planning, Emmanuel leads the broking team at Loanscope. His experience includes working with a wide range of property investors, from first time buyers to investors with large property portfolios. This includes handling complex applications involving trusts, company structures and self-managed super funds. He also operates as a qualified mentor to other mortgage brokers via the FBBA mentor program.
Emmanuel Guignard