What is Lenders Mortgage Insurance (LMI)?
Lenders Mortgage Insurance (LMI) is insurance to protect the Lender in case you default on your loan.
It is a one-off payment made by the Buyer at Settlement.
LMI is payable when you need to borrow 80% or more of the value of the home – for example, if the purchase price of a home is $1,000,000 and you only have $150,000 deposit, you need to borrow 85% which means you are likely going to have to pay LMI
The government does provide occasional incentives for first time Buyers to reduce or waive the LMI on loans
LMI is in place to protect the Lender, not the person borrowing the money
If you are borrowing less than 80% of the price of the home, you do not need to pay LMI
You don’t need to arrange LMI as the Lender will organise it for you
The amount of LMI charged depends on the amount you borrow and how much deposit you have available
LMI is good because even with a small deposit, you have the option of being able to buy a home sooner. It allows the Lender more confidence in offering you a home loan, regardless of whether you have 20% deposit.
Some Lenders will even allow you to borrow up to 95% of the purchase price of the home, making it easier to achieve the dream of owning a home sooner for many Buyers.
