Lenders Mortgage Insurance. The Ins and Outs.
When you apply for a home loan there are many things the lender will review including how risky your ability to make the loan repayments is. Borrowers with large deposits and a steady income are more favoured than those with less to anchor their investment.
If you are wanting to borrow a high percentage of a property’s value (generally over 80%), if your income is not consistent or you are self-employed you may be required to have Lenders Mortgage Insurance (LMI).
What is it?
LMI must be paid by you (the buyer), but protects the lender if you are unable to repay your loan and the sale of the property doesn't cover the outstanding loan balance.
What does this mean for me?
As your mortgage broker I can advise you if you require LMI and do all the paperwork for you. Phew! You may also be able to borrow more or buy sooner than you thought. Because the lender is protected by LMI, some lenders will consider loan deposits as low as five per cent.
LMI is a one-off fee that can be subtracted from your loan or paid up-front. It can be expensive so we will factor it into your costs when working out your financial plan.
The LMI premium is calculated based on a number of factors, ranging from how much you want to borrow, the type of loan and the value of the property.
I can talk you through if and why you need LMI so if you have questions, give me a call.