What Is Lenders Mortgage Insurance [LMI]?

 

Lenders Mortgage Insurance (LMI) is insurance that protects the lender in the event that you default on your home loan. It is paid as a once off insurance premium or fee when your loan is advanced.

 

LMI is only applicable if your loan poses a high risk to the bank. This is generally because you are borrowing a high percentage of the value of your property.

 

When is LMI is involved?

 

As a general rule of thumb, you will pay LMI if borrowing over 80% of the property value.

 

If you are self employed and are applying for a low doc loan because you cannot prove your income, then LMI will apply if you borrow over 60% of the property value.

The insurance is arranged by your lender or bank during your loan approval process so you don’t have to worry about any additional paperwork.

 

Did you know that you can borrow 100% of the purchase price and pay no LMI if you use a guarantor mortgage that is supported by your parent’s property?

 

Contact Us to find out if you qualify for a guarantor loan OR if LMI can be waived!

 

Who is protected by LMI premium?

 

Mortgage insurance does not protect you as the borrower, it only protects the lender. If you are unable to repay the loan and the lender does not recover all of their money then they can make a claim with the insurer.

 

This insurance does not cover you for damage to the property that is being used as security for the mortgage. Damage to your property is normally covered by your building insurance policy or, if you have a strata title property, then it will be covered by your strata’s building insurance policy.

 

LMI should not be confused with loan protection insurance or mortgage protection insurance, which covers you, the borrower, in the event that you are unable to repay your loan.

 

You should always consider your life, total and permanent disability (TPD) and income protection insurance needs when you buy a property to make sure that you are able to pay your loan and support your family in the event that you pass away, become sick, lose your job or have an accident.

 

Unfortunately, many Australians do not take out these policies when they buy a home and as a result they cannot cope with major life events.

 

Contact Us to find out the best suitable solution for you!

 

Can the LMI premium be waived?
 

Although it is rare, it may be possible to get the lender to waive your LMI completely or to charge a negligible amount. To do this though, most lenders require that you meet the following criteria:

 

Doctors:

 

  • Maximum loan size $4.5 million.

  • Maximum loan of 90% of the property value (borrowing more is sometimes possible).

  • You must be a member of an appropriate industry organisation (e.g. AMA).

  • You must be on the preferred medical professionals list, a dentist, optometrist, veterinarian or a pharmacist.

  • Contact Us to find out the best suitable solution for you!

Accord Finances Pty Ltd 613 417 119 is a Corporate Credit Representative No. 490850 of BLSSA Pty Ltd ACL No. 391237.