For any banking institution preparing to lend a customer a home loan, two of the most important factors to your home loan success rate are your job and your job stability. These factors effect whether you are seen as a high- or low-risk loan candidate and dictate your loan capacity. It stands to reason, therefore, that your current job has a fair amount of effect on your home loan options.
Banks considering lending you money want to know how much of a risk you present to making future repayments. While a range of factors indicate risk in a borrower, applicants who work in industries where job security is a higher risk are looked at less favourably by banking institutions. The result of this is that banks may offer less favourable loan conditions, including higher interest rates, to these risk borrowers.
Employees with higher salaries represent more secure, long-term careers, and therefore more likely guaranteed repayments on a given loan to the lending institution. Because of this, professionals such as doctors and lawyers have historically been higher on a bank’s list of preferred borrowers. For highly-paid professionals this means they have the potential to access a range of benefits as lenders want to incentivise these low-risk loans.
The low down on professional home loans
These types of loan incentive packages are generally available with a professional home loan and can apply to a range of professions that include medical, legal and finance professionals, but also various mining, energy and resource professionals.
Professional home loans reward low-risk high-profit customers expected to have high salaries over a long-term period. Professional home loan schemes often involve the waiving of Lenders Mortgage Insurance (LMI), a one-off payment generally required by those looking to borrow more than 80% of their property’s purchase price, or reduced interest rates on loans that falls between 0.5% and 1% on variable home loans or up to 0.25% on fixed interest rates. Other incentives can also include credit card benefits for package deals and 100% offset accounts to help borrowers save more on their home loan.
Professional home loan schemes are not exclusive to first home buyers and can also be used to buy consecutive homes, to secure better incentives on a current mortgage, to purchase an investment property or to build a brand new home.
Where can you go to access a professional home loan?
One bank advertising loan exemptions to professionals is Bank of Queensland. Through their BOQ Specialist subsidiary the bank offers specialist banking services to a range of niche market segments that include dental professionals and veterinary professionals. For eligible doctors and medical professionals looking to apply for a home loan they may be eligible to access 100% finance on an owner-occupied property or up to 95% finance on a an investment property, again waiving the usual LMI requirements based on their future earnings potential, saving these borrowers years of accruing a deposit on their home loan.
Professional home loans are not offered by all banking institutions, however most banks will be able to offer highly-paid professionals some kind of incentive when choosing their home loan package if you know the right questions to ask. While professional home loans were traditionally restricted to medical professionals, lawyers and accountants, some banks have these incentives available to borrowers based simply on their incomes and assets rather than their job title, although expect the salary cap for professional loan incentives to start kicking in at around $150,000.
These job-aligned discounts are not generally advertised by the banks, and can be hard to negotiate as an individual. This is where a mortgage broker can be a real asset in securing your home loan, as they’ll be able to secure the best possible loan on your behalf or direct you to banking institutions that are willing to offer you those sweet incentives.
Related: Home loans for healthcare workers
How much can a professional home loan save you?
The amount you can save in LMI depends on the size of each loan and the size of the associated deposit. As a very rough guide, an average borrower looking for a home loan of $500,000 who have a $50,000 deposit saved can expect to pay around $10,000 in LMI. This amount is built into the loan amount, making the total of the loan $510,000, increasing the loan repayments and generally costing the borrower more over the lifetime of the loan. LMI is applied to most loans where the borrower has less than a 20% saved deposit to protect the lender from higher-risk loans.
This doesn’t mean that your only chance of securing a home loan is enrolling in medical or law school. It’s important to remember that your job industry isn’t the only factor that suggests long-term employment risk. More important is how long you’ve worked in your current role and industry and your current employment status. A permanent full-time employee represents potentially less risk to a bank than those who are self-employed, contract workers, causal employees, temp workers, probationary workers and part-time workers, but again this doesn’t mean home loans are off limits to anyone not holding a permanent full-time job. If you’re unsure what your home loan options may be getting in touch with a home loan broker to discuss your specific requirements and get professional advice on your home loan plan is always a good first step.
You might also like: Understanding Lenders Mortgage Insurance
Words by Danielle Austin
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