Psychologist home loans: 10% down with no LMI, and which banks say no

Can a psychologist get an LMI waiver?

Yes, at one lender group. Westpac, St.George, Bank of Melbourne and BankSA (the Westpac Group) waive lenders mortgage insurance up to 90% of the price for psychologists, on principal-and-interest loans, if you earn at least $90,000 before tax from your eligible qualifications [1]. Psychologists sit in the second of Westpac Group's two medical groups, with pharmacists, physiotherapists, optometrists, vets, and registered nurses and midwives [1].

LMI is insurance that protects the lender, not you, when you borrow more than 80% of the price, and you pay for it. On a $540,000 loan it runs past $11,000 on one insurer's card (part 7). The waiver means you don't pay it.

Bank First also waives LMI for healthcare workers buying their first home, on loans up to $800,000. Its policy doesn't list which roles count, so whether a psychologist qualifies is a question for Bank First [2].

What counts toward the $90,000?

Your own pay before tax from your eligible qualifications, added up across all your jobs in them [1]. A salaried role and a second part-time role in the profession both count toward it. A partner's income doesn't count toward the $90,000, even on a joint loan, and neither does income from work outside your qualification [1].

The $90,000 is a minimum, not the whole test. The lender still works out what you can borrow from your full income, your debts and your living costs (part 19).

What this means for you: if you're just under $90,000, a second role in the profession can be what takes you over the line. If you're well under it, the other ways in (part 6) are the ones to compare.

Work for a federal department? Bankwest has another door

Bankwest's medical waiver leaves psychologists out by name, but Bankwest has a separate waiver for staff of federal government ministerial departments at APS6, EL1, EL2 or SES level [3]. It goes up to 89.99% of the price, principal and interest, with the loan in your own name [3].

Only federal ministerial departments count, and state departments are excluded [3]. So a psychologist in a state hospital or health service won't fit it. If you work for a federal department at one of those levels, it may, and we'd confirm your role and department with Bankwest first.

Psychologist first home buyer? Your ways in with less than 20%

If this is your first home, you have more than one way to buy without a 20% deposit. Which one fits depends on your income, your price and what you've saved.

What this means for you: the income lines cross. The Westpac Group's waiver needs at least $90,000 from the profession [1], and Help to Buy stops at $103,000 for a single buyer [7]. A psychologist earning between the two can look at both. One earning more than $103,000 on their own is past Help to Buy, and the 5% Deposit Scheme has no income cap at all [6]. The 5% Deposit Scheme and Help to Buy can't be used together, and a 5% Deposit Scheme home must be one you live in and don't rent out while the guarantee is in place [6].

You can also pay LMI and buy sooner. Which way comes out ahead is worked out on your numbers, not picked from a list. See First Home Guarantee, Help to Buy, guarantor home loans and the first home buyer grants in your state.

What skipping LMI is worth, in dollars

Here's what LMI would cost on a 90% loan, from one insurer's published rate card [5]. With the waiver, that cost is gone.

These are illustrations from one rate card, not quotes. Your premium depends on the insurer, the loan and the lender, and the card charges investors more [5].

When taking the waiver costs more than it saves

Taking the waiver costs more than it saves when another lender's loan is better for you by more than the LMI. The waiver ties you to the Westpac Group banks and their terms: principal-and-interest repayments [1] and their pricing. If another lender would price your loan lower over the years you hold it, or lend you more, the difference can outweigh the LMI you save.

None of the waiver policies we hold sets a lower interest rate for psychologists, so your rate is priced like anyone's: by the lender, the loan and the share of the price you borrow. The Westpac Group's policy does allow an interest-only period that converts to principal and interest, at the same 90% [1].

What this means for you: compare the options over the time you expect to hold the loan, not just the LMI on day one.

Employed, contracting or in private practice: why it changes the answer

How you're paid decides what a lender reads, and that can matter more than the waiver. A salaried psychologist is read from payslips. A contractor billing a practice on an ABN, and a practice owner, are usually read as self-employed, from tax returns.

The Westpac Group's policy as we hold it doesn't say whether a self-employed psychologist qualifies for the waiver [1]. So for contractors and practice owners, that's confirmed with the lender before anything else.

Salaried in a hospital, health service or government role

A salaried psychologist is the straightforward case: your base pay counts in full, and the question is what a lender does with the rest of your payslip.

Overtime: ANZ counts 80% of overtime [13]. Lenders differ on how much overtime they count, so if overtime is a real part of your pay, ask which lender counts the most of it before you choose.

Allowances: ANZ counts ongoing allowances in full, but not higher-duties pay or one-off payments. ING counts allowances up to 25% of base pay [13]. If you're employed by a federal department, see part 5.

Salary packaging: how it can lift what you borrow

If your employer is a public or not-for-profit hospital or a public ambulance service, you can package up to $17,000 a year of your pay without fringe benefits tax. At public benevolent institutions and health promotion charities, the cap is $30,000. Both are grossed-up amounts, per employee [15]. Packaging depends on your employer, not your profession, so it won't apply to a psychologist in private practice.

Packaged pay is tax-free, so the same pay can leave you more to repay a loan with. Some lenders count that tax-free part as income in its own right, which can raise what you can borrow. Lenders don't all treat it the same way:

What this means for you: two psychologists on the same salary can get different borrowing answers because one lender counts their packaging as tax-free income and another needs paperwork first, or adds it back differently. That's why the packaging statement matters as much as the payslip.

Bring your packaging statement along with your payslips.

Contracting to a practice on an ABN

A psychologist who contracts to a practice and invoices on an ABN is usually read by lenders as self-employed, even if all the work comes from one practice. That means tax returns and notices of assessment rather than payslips, and most lenders ask for two years of them.

What a lender works from is your taxable income after expenses, not the fees you billed. The costs you claim, such as room fees, reduce it, so a lender sees a lower figure than your invoices.

Lenders set different minimum times trading and read income in different ways, which is why the lender you choose matters more for a contractor than for a salaried psychologist. See self-employed home loans.

In private practice: one year of tax returns or two?

Two years is the usual rule, but psychologists have an edge here. One lender's credit guidelines list 11 professions, psychologists registered with the Psychology Board of Australia among them, for whom one year of income can be enough [8]. The conditions: you borrow 80% of the price or less, the business has traded for at least 12 months, and you show either the latest year's standard documents or just your latest personal tax return and notice of assessment. That lender then doesn't ask for more about the business's profitability [8].

Other lenders have one-year rules of their own, each drawn differently. NAB will consider a single year's financials where you borrow 80% or less [11], and ING has announced one year for self-employed borrowers generally, with no limit published [12]. The table sets the first lender beside MyState:

What this means for you: one year is a trade between paperwork and deposit. With 20% saved, a psychologist a year into private practice may be able to apply now. With 10%, plan on two years of returns, or on the waiver if the lender confirms you fit.

If your practice income has grown, or your latest return isn't lodged

Lenders don't simply take your best year. Firstmac's policy uses the lower of your latest year's taxable income or 120% of the year before [9]. If you earned $80,000 one year and $130,000 the next, it would use $96,000, not $130,000. A change of 20% or more between the two years has to be explained [9].

On the one-year route in part 13, a year-to-date income statement covering 3 months or more can be annualised, capped at 120% of your personal tax return figure [8].

If your latest return isn't lodged yet: one lender accepts a draft on its professional pathway if your accountant confirms in writing that it won't change [8]. MyState doesn't accept draft returns or projected income, and won't use figures more than 18 months old when you apply [10].

If your practice is a company, Firstmac counts only what reaches you, as wages, directors' fees or dividends, for a loan in your own name [9]. ING has announced that a director owning at least 50% of the company can use its profits [12].

What this means for you: a strong recent year in private practice can count for less than you expect, so the year you apply in matters.

Newly registered, in a new job or on probation

Lenders want to see you've started and been paid. At Westpac, a loan without mortgage insurance needs you to have started and received at least one pay. A mortgage-insured loan needs 3 months in the job, or less than that with 12 months in the same occupation and no gap of more than 2 months between jobs [14]. Whether a waiver loan counts as "without mortgage insurance" for this rule isn't stated in Westpac's policy, so it's a question we put to the lender for you.

A new job or a pay rise is shown with your employer's letter, email or contract giving your new base pay, and one payslip at the new rate [14].

Part-time, or on parental leave

Permanent part-time pay counts as base pay. Westpac uses the lowest base rate and hours on your payslips, unless there's a reason they vary. One-off unpaid leave can be counted back in if you confirm you're back to your normal hours [14].

You can buy while on parental leave. Westpac can use your return-to-work pay, base pay only, with a letter from your employer giving your return date, your hours and your pay. Every child counts as a dependant, including one not yet born. If your first repayment falls before you return, you'll need savings that cover the gap, on top of the money for the purchase. With a mortgage-insured loan in that case, Westpac won't lend for an investment [14].

How much can a psychologist borrow?

It comes down to three things: what a lender counts of your income, your debts and your living costs. Banks then check you could still make the repayments if rates were 3 percentage points higher, and APRA caps loans to people whose debts are six or more times their income at 20% of each bank's new home lending [16].

A HELP debt from your study counts as well: MyState, for one, checks your notice of assessment for it and includes the repayments [10].

That's why the same psychologist can get quite different answers from two lenders. One that counts your packaging as tax-free income, or reads your practice on one year rather than two, can lend noticeably more than one that doesn't. See how much can I borrow.

Buying with a partner who isn't a psychologist

You can. At the Westpac Group banks, the $90,000 test is on your own income from the profession, so your partner's income doesn't help you reach it [1]. Your partner's income does count toward what you can borrow together.

At ANZ, if the loan has LMI and you're casual, you can't be the only or main earner, so a partner's income matters there too [13]. Through Help to Buy, the income limit for the two of you is $165,000 [7]. A joint 5% Deposit Scheme application is two people, and they don't have to be a couple [6].

Investing as a psychologist

The Westpac Group's policy as we hold it sets one limit for psychologists, 90%, and doesn't separate buying to live in from investing [1]. So we'd confirm an investment purchase with the lender before you rely on the waiver. Bank First's waiver is for first home buyers only [2], and a 5% Deposit Scheme home can't be rented out while the guarantee is in place [6].

If you pay LMI on an investment, it costs more than on a home: the rate card adds a loading for investors [5]. Once you own one property, the order you buy the next ones in decides whether you can keep going: see using equity to buy an investment.

Buying or fitting out a clinic

A loan to buy into a practice, buy consulting rooms or fit them out is business lending, a different product from a home loan, and this guide doesn't set out its terms.

What it changes for your home loan is your borrowing: business debt you owe or guarantee is counted when a lender works out what you can borrow. If your practice is a company or trust, its financial statements come into the home loan assessment too (part 9).

Overseas-trained psychologists and visa holders

If you're registered here and working as a psychologist, the same lender rules apply. What changes is your visa: many lenders treat permanent residents like citizens and ask more of temporary visa holders. Help to Buy is for Australian citizens only [7], and the 5% Deposit Scheme is for citizens and permanent residents [6]. See home loans for visa holders.

What does a broker cost you?

How a broker is paid, and the rule Money Brain holds against it, is set out in full on its own page: what a mortgage broker costs.

Your first move

You've read the rules. Now there's one question left: which lender, for the way you're paid, at the price you want? That depends on your income, whether you're salaried, contracting or in practice, and your deposit, and it's what Money Brain works out before anything goes to a lender.

When you're ready, the closing section below is the simplest way to start.