Lenders Mortgage Insurance or LMI is a one-off insurance premium which, in some cases can be payable to protect your lender in the unlikely event that you were unable to meet your mortgage repayments. In most cases, Lenders Mortgage Insurance is only required when the amount you want to borrow is more than 80% of the total value of the property. Pending each lenders specifications, LMI allows you to borrow up to 95% of the purchase price of your home, with a lower deposit than traditionally required.
LMI can be paid up front on top of the initial deposit or can be absorbed into the overall amount borrowed. Beware of including the LMI cost into the overall amount of interest will be calculated on this amount for the term of the loan.
For example:
• You find a home you would like to purchase for and its market value is $400,000, however, you only have a $40,000 deposit.
• If you borrow up to 90% ($360,000) of the value of the home, you will need to pay LMI. In this case, your approximate LMI premium will be $6500 and needs to be paid on top of the $40,000 deposit.
• However, if you were to have $100,000 for a deposit, you would not have to pay LMI due to the loan to property value being below 80%.
Note: Lenders Mortgage Insurance should not be mistaken for Mortgage Protection Insurance which covers your mortgage repayments in the event of unemployment, injury or death.
Looking for a reliable mortgage broker in Campbelltown that can help you with your mortgage insurance needs? Consult Lendium today!