Lenders’ Mortgage Insurance, or LMI, is insurance that protects the lender, not you. It’s usually a one-off, non-refundable, non-transferrable payment made by the borrower at the time of loan settlement. Here are important facts about LMI:
- LMI is a type of insurance you can expect to pay if you borrow more than 80% of your home’s value.
- LMI protects the bank against any loss it may incur if you are unable to repay your loan.
- You don’t need to arrange LMI yourself – your lender will sort it for you.
- It’s possible to save on LMI by saving a bigger deposit of 20% or more.
When is LMI required?
LMI may be required if your home loan deposit is less than 20% of your property’s purchase price.
Different lenders have different rules to LMIs and valuation, always consult with your mortgage broker or lender to ensure you have the most accurate information for your circumstances.
How can I avoid LMI?
There are a few popular ways to avoid LMI but different lenders use different criteria:
- 20% deposit or more of the property purchase value
- Certain professions such as accountants and lawyers may have their LMI waived completely or can have a lower percentage deposit. These are generally professions that lender’s may deem as less risky to default on the loan.
- Have a guarantor. This is usually a family member.
