Getting a foot on the property ladder can be a challenge, particularly when you have to save a 20% deposit. However, you might be able to buy a property sooner if you’re prepared to pay lender’s mortgage insurance (LMI).
LMI is an insurance policy that protects the lender if you default on your home loan. That said, LMI is actually paid by the borrower, as a one-off premium.
Don’t confuse LMI with mortgage protection insurance. Mortgage protection insurance protects borrowers if they can’t pay their mortgage under certain circumstances.
Lenders generally insist you pay LMI when your deposit is less than 20% of the property’s value.
The cost of the LMI premium depends on the size of your deposit, how much you borrow and the lender’s individual policies.
The table below gives a rough guide of typical LMI premiums.
Need help working out how much your LMI premiums could be? Speak to a Shore Financial broker today.
You can avoid paying LMI by:
While LMI can add thousands of dollars to the cost of buying a property, it isn’t necessarily something to be avoided.
That’s because the benefits of paying LMI might outweigh the costs. For example, when you:
Sometimes, property prices can rise faster than your ability to save a 20% deposit. In these instances, paying LMI might be a more cost-effective option.
Your Shore Financial broker can help you do the sums and talk you through all your options so you can make an informed decision.
We appreciate your message and a Shore Financial Adviser will respond to you within a few short days. In the meantime, here’s a few links to keep you occupied.
We appreciate your message and a Shore Financial broker will respond to you within a few short days. In the meantime, here’s a few links to keep you occupied.
