Lender’s Mortgage Insurance (LMI)

Lender’s Mortgage Insurance is a type of insurance that allows consumers to purchase a home with less than 20% deposit.  All banks throughout Australia currently require you to pay LMI if you are borrowing more than 80% of the purchase price.  LMI is paid as a once off premium paid at the start of your loan, and can be paid up front, or added into the loan.

After the Bank approves your loan, they will apply for LMI on your behalf and let you know the outcome.  LMI is used to protect the Bank in case you default on your loan, allowing them to make a claim against any losses they make after the sale of the repossessed property.

Do I have to pay LMI?

If you don’t have a 20% deposit, you will always be required to pay LMI unfortunately.  Some non-banks don’t require LMI approval; however, will charge a fee of their own which is always more expensive.

Does LMI Protect me?

No.  Lender’s Mortgage Insurance is purely for the benefit of the bank and will not protect you in any way should you not be able to make your repayments.  For personal protection, please look into Mortgage Protection Insurance or Income Insurance.

How much does LMI cost?

You can find a premium estimator here; however you should always talk to a Mortgage Broker for a more accurate figure.   It is also important to remember this needn’t (and in most cases, shouldn’t), be paid up front, but rather added into your loan.

Who Provides LMI?

There are 2 major LMI providers in Australia: Genworth and QBE; with a 3rd, international insurer being used by some lenders – Arch.

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