Lenders Mortgage Insurance
If you are borrowing more than 80% of the value of your property then you will need to consider the cost of Lenders Mortgage Insurance.
Although paid for by the borrower, Lenders Mortgage Insurance (LMI) protects the lender if the borrower is unable to repay the loan and the sale of the property does not cover the outstanding loan balance and costs.
The upside to the borrower is that due to the backing of LMI lenders are willing to consider low deposit loan applications for deposits as low as 5%. The downside is that LMI can be expensive and you need to consider this when working out your financial position.
The LMI premium is generally calculated on:
- How much you want to borrow
- The LMI product type (e.g. first home buyer, low-doc loan) and,
- The loan-to-value ratio (LVR)
How Much Lenders Mortgage Insurance Will I Need To Pay?
Your LMI premium will also vary between banks and lenders, so a mortgage broker is best placed to help you compare LMI costs.