Mortgage insurance for lenders (LMI) is insurance that protects the lender from the losses of a mortgage. LMI capitalization is a process in which the lender adds the cost of LMI insurance to the amount of the loan. If you prefer to pay your LMI up front, you can do so as well; however, this is less common among first-time homebuyers, as most people prefer to use those funds to increase their deposit. It's important to understand that the LMI doesn't protect the borrower if they can't afford the mortgage, but it does protect the lender.
By using the LMI to protect your interests, some lenders will allow you to borrow up to 95% of the purchase price of your property, meaning you'll be able to access your home much sooner. A guarantor means that you can still borrow the same amount with the same (or a smaller one) deposit and you won't have to pay any LMI. The LMI is a term used by banks, lenders, mortgage brokers, accountants and financial planners when talking about buying a property and the requirements of its loan. Doctors, Accountants and Lawyers 26% of specific investors may qualify for an LMI exemption; 26% save thousands of dollars on their home loan.
In addition, the LMI may delay the application process, as the borrower must meet the lending criteria of both the lender and the LMI insurer. The LMI is non-refundable, which means that even if you can apply for a 30-year loan and return it after just 10 years, you won't receive any reimbursement in the form of a premium repayment. That said, there are some professions that can be approved for up to 95% of LVR without having to pay any LMI. This means that instead of paying thousands of dollars up front and out of pocket, the lender will add the LMI to the principal of your loan and you will pay it off during the term of the loan.
The cost of the LMI may vary depending on the percentage of the value of the property borrowed and the amount of the loan. Then, the LMI insurer can come to you, the borrower, and demand that you pay the deficit directly to them and not to the lender.
