Why Lenders Mortgage Insurance
To a lender a buyer’s ability to make their mortgage repayments may be considered high risk if they want to borrow more than 80% of a property’s value.
That’s where Lenders Mortgage Insurance comes in, or LMI as we like to
call it! It’s one way to overcome this risk. LMI is paid by the borrower to
protect the lender in case repayments cannot be met and the sale of the
property won’t cover the loan balance.
How much LMI?
There’s various factors that determine the LMI premium to be paid. As
with all things, each lender differs. Some of the factors are as per below:
- Property contract price
- Deposit contributions
- Loan to value ratio (LVR)
- Employment type, ie self employed, full time etc.
- Loan Purpose, ie investment or owner occupy.
The good news is that LMI allows you to get into the property market quicker, by removing the risk to the lender, and allowing you to borrow at a higher LVR. LMI is a one-off fee that can be added to the loan or paid up-front. Essentially you will pay more, but it can be factored into the costs hen reviewing your financial situation.