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Lenders Mortgage Insurance is often referred to as LMI. It is insurance that a lender takes out to insure itself against the risk of not recovering the full loan balance if the borrower (you) were unable to meet loan repayments.
LMI is a one-off fee charged by the Lender to you when you need to borrow more than 80% of the value of the property.
Bob and Jill have found a home they want to buy for $500,000. Typically, they would need a 20% deposit ($100,000) to secure a loan from their lender. By taking out Lenders Mortgage Insurance, their lender is prepared to provide a loan up to 95% of the value of the home.
This means that Jenny and Tom can secure a home loan sooner with a 5% deposit ($25,000) and stop paying rent. Their lender passes on the Lenders Mortgage Insurance premium cost to Bob and Jill by way of a fee called a “premium”.
The Lenders Mortgage Insurance protects the lender if Bob and Jill default on their loan repayments – it does not protect Jenny and Tom.
Download our Lenders Mortgage Insurance Fact Sheet here
Important: If you experience problems in meeting your loan repayments, you should contact your lender as soon as possible as you may be able to arrange a payment variation on the grounds of financial hardship. More information about LMI can be found at www.moneysmart.gov.au or www.asic.goc.au.
Vincents Lending Solutions Pty Ltd ABN 69 848 383 535 | Credit Representative 509289 is authorised under Australian Credit Licence 389328 Disclaimer: The information provided is of general advice only. We have not considered your financial circumstances, needs or objectives and you should seek the assistance of your Vincents Advisor before you make any decision regarding any products and services mentioned in this communication. Liability limited by a scheme approved under Professional Standards Legislation other than for acts or omissions of financial services licensees.
Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to your circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.
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