Lenders mortgage insurance or “LMI” is an insurance policy that the borrower must take out if they are borrowing over 80% of the properties value. The policy protects the lender (not the borrower) in the event the lender has to sell the property and there is a shortfall in funds. It is a one off insurance premium or fee paid by the borrower when the loan is drawn down. Most lenders allow you to ‘capitalise’ or add the LMI premium to the loan amount.
LMI is a good and a bad thing. It’s a good thing in that if LMI did not exist all borrowers would have to come up with enough cash to fund a 20% deposit and purchase costs. (that’s a big stretch for most first home buyers and investors). It’s a bad thing in that its an extra cost of “getting in”, however often the growth in the value of a property very quickly far outweighs the cost of the LMI.
If you are interested in finding out more about LMI and how it applied to your individual situation contact your Stax Home Loans your local mortgage broker on the Sunshine Coast (based in Peregian Beach).
Ollie Hooper – Stax Home Loans
Mortgage Broker
m: 0401 032 868
e: ollie@staxhomeloans.com.au