What is mortgage insurance?
Lenders mortgage insurance (often referred to as LMI) is an add-on to many home loans that is designed to reduce the lender's risk of letting you borrow money. Traditionally speaking, a home loan with an LVR of more than 80 per cent will require additional fees in order to offset what the lender sees as a potential liability.
LMI can be paid:
- As a lump sum or
- It can be worked into your regular mortgage payments.
A common misconception is that LMI is insurance for you, so your loan doesn't default if disaster strikes and you are unable to make payments. This is not the case, LMI protects the lender in the event you cannot make these payments.
That being said, LMI is actually highly beneficial for borrowers. Because it's considered risky to lend more than 80 per cent of a property's value, LMI allows lenders to do so.
This means that by paying LMI, you could potentially purchase a house with a lower deposit and get into the property market sooner, with no additional risk to the bank. While it may cost a little more than a standard loan, most home buyers see it as a necessary cost to secure the property they desire.
Terms, conditions, fees, charges and normal lending criteria apply. Full details are available in our loan offer or on request. All-In-One Accounts and Interest Only repayments are not available with a Parent Equity Home Loan.
1. The guarantee and additional security must be provided by your parent(s), in law or step-parent(s).
2. Lender’s Mortgage Insurance is not required where the loan value is less than or equal to 80% of the total value of the property, plus the additional security provided by the guarantor.
3. Provided the borrower(s) are not in default and the LVR on the outstanding loan balance is below 80%.