What is Lenders Mortgage Insurance
Lenders Mortgage Insurance (LMI) is applicable to the loan if you are borrowing over 80% of the property’s value. The LMI protects the lender against non-payment or if you default on your residential property loan. LMI makes purchasing a property with only 5% deposit possible for eligible customers.
How does it work?
LMI is a one-off fee paid by borrowers when they take out a home loan. Fees vary according to the amount borrowed and the size of the deposit. In the event that the lender needs to sell their property and the proceeds do not fully repay the loan, the lender can make a claim for the difference from the insurer. In that case, the borrower is still legally liable to repay the insurer.
Benefits of LMI
While LMI is primarily about protecting the lender there are also benefits for the borrower.
- It enables access to buying a home sooner with a smaller deposit.
- It can increase your choice of properties, allowing you access to a wider selection of price range.
- It can allow borrowers to retain some of their capital for other purposes – buying a car or investment