When you’re purchasing a property, it’s for a long-term investment and you are going to ride multiple property cycles, and that’s how you build financial wealth. A significant number of borrowers are unclear about lender’s mortgage insurance (LMI).
Lenders Mortgage Insurance(LMI) is a form of insurance that protects the lender in case the borrower defaults on the mortgage and the lender can't recover the loan from selling the home. The premium varies, depending on the size, type and location of the property.
Lenders generally insist borrowers take out LMI if they want to buy a property with less than a 20% deposit – although, for some professions, such as doctors, lawyers, or accountants; it’s possible to buy a property with a smaller deposit without paying LMI. LMI does not protect the borrower but allows lenders to approve loans with smaller down payments by transferring some risk to the insurance provider. Borrowers usually pay the LMI premium, either as a one-time payment or added to their loan amount.
The upside to using LMI is you can enter the market with a smaller deposit without waiting too long; the downside is the cost.
We are happy to discuss both the potential benefits and costs, so you can make an informed decision about whether LMI is right for your personal situation.
Dream Catchers Lending is an MFAA-accredited member. Feel free to book an obligation-free virtual appointment or leave us your details and we'll be in touch.
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