The most common way people avoid paying the LMI is to meet the 20% deposit requirement set by lenders. This means that you only borrow 80% of the value of the property, which can be expressed by the loan-to-value ratio (LVR). The lender's mortgage insurance (LMI) is a single, non-refundable, non-transferable premium that is added to your mortgage loan. It is calculated based on the amount of your deposit and the amount you borrow.
The more you contribute to the purchase price of your property, the lower the cost. The LMI protects the bank against any losses we may incur if you are unable to repay your loan. If a lender requires a person to take out an LMI, it can usually be paid in advance or added to a mortgage loan. LMI premiums are generally non-refundable, meaning that if you switch your loan to another provider in the future, you generally won't be able to transfer your LMI to another lender.
When more than 80% of the value of a property is borrowed, it is generally a condition of the loan that the borrower pays mortgage insurance (LMI) from lenders. However, you can find a lender that structures the LMI in the way that best suits you, either as an initial cost that is added to the total amount of the loan (meaning that you will pay it over the life of the loan), as a monthly premium, or as an added margin to the interest rate while your LVR is below 80%. Alternatively, you can work with a mortgage broker to learn more about how to avoid LMI, as well as for general financial advice on buying a home. Like mortgage insurance from lenders, this extra cost can help you get your mortgage loan with a lower deposit.
This video, which answers some of the most frequently asked questions about LMI, is a great way for lenders to understand the basics of mortgage insurance. A family member can help you get a mortgage loan by mortgaging your property as additional security. For these reasons, an exact LMI cost cannot be given until a property and lender have been selected, and it could be a fixed rate of up to thousands of dollars. Your mortgage broker will be able to identify not only how likely it is that the LMI will be approved, but also how long the application may take.
Mortgage protection insurance insures borrowers and can cover mortgage repayments in the event of unforeseen circumstances, such as unemployment, injury, illness, or death. When you apply for a mortgage loan, the deposit you provide as a percentage of the value of the property will determine whether or not you should pay mortgage insurance (LMI) from lenders. Both stamp duty and GST are paid in lenders' mortgage insurance and are generally included in the total quoted price of your LMI. Some lenders offer promotional offers for first-time borrowers, so it's always a good idea to keep an eye out for these offers.
