Pros And Cons Of Lenders Mortgage Insurance
Home loans have different requirements for different people and depend largely on your initial loan application.
For borrowers with a large deposit and a steady income, mortgage options may be slightly more favourable than for those with less to anchor their investment.
For example, those who are borrowing more than 80 per cent the value of the property are required to take out Lenders Mortgage Insurance (LMI).
LMI must be paid by the buyer but 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 advantage to the borrower is that due to the backing of LMI lenders are willing to consider deposit loan applications for deposits as low as five per cent.
However, LMI can be expensive and you the cost must be considered when working out your financial position.
The LMI premium is generally calculated on how much you want to borrow, the LMI product type - for example, first home buyer, low-doc home loan - and the loan-to-value ratio.
A chat with your mortgage broker can help to explain the LMI further.
To get more detailed information on your situation, talk to a Loan Market mortgage broker today.