Self-employed

How LMI can help make business better

After 15 years in the IT industry, Ross decided to go work for himself. Three years on, he has a thriving customer support business, working from home and servicing clients largely over the phone and internet.

Currently living in a small two bedroom house he bought ten years ago, Ross is now looking to upgrade and get extra room to use as an operational base for a rapidly growing business.

"I'd been thinking about upgrading for a while, but it's become a higher priority as my home is now also my workplace," Ross said. Being self-employed, with a relatively new business, Ross has found it difficult to get the loan documentation together. However, with the equity from the sale of his existing property he has a sizeable deposit, and, by using a comprehensive savings plan, has continued injecting capital into his business.

Ross approached his lender who recommended he apply for a low doc home loan and take out Lenders Mortgage Insurance (LMI) provided by Genworth Financial. To be eligible for this loan, Ross had to show 12 months of BAS statements, be GST-registered, have six months of transaction account statements, and have been registered as a business for at least 24 months.

His lender explained that by using LMI, Ross could still save much needed business capital while purchasing the new property with a 20% deposit.

His lender also suggested that Ross capitalise the cost of LMI onto his loan*. It added only $29 to his monthly mortgage repayments, but avoided diverting capital from his business by having to make an upfront payment. "My lender was really helpful in helping make owning my new home a reality sooner. By using LMI, I've purchased a house that caters to my needs while not sacrificing the capital needed for my business," said Ross.

How Ross crunched the numbers

LMI: the benefits

• Enabled Ross to get approval on a home loan with only a 20% deposit, despite not having all the necessary documentation
• Helped him to create a reliable base in his home from which to grow his new business
• Contributed to his future financial stability
• The cost of LMI was capitalised onto his loan, so he didn't have to sacrifice capital intended for the business