What is mortgage insurance?

Lenders Mortgage Insurance (LMI) protects the Lender or financial institution.

Unfortunately the type of mortgage insurance that you may be faced with paying, is Lenders Mortgage Insurance. It is required to be taken out against your home loan once the home loan amount exceeds 80% of the value of your property. (This percentage can be lower in certain circumstances e.g. Low Doc Loans)

LMI protects the lender incase you default on your on your loan, and the sale price of your home is not enough to cover the debt against your home.

The lender will submit your application to the Lenders Mortgage Insurer for approval before they themselves will offer formal or unconditional approval on your loan application. The rate and amount of insurance that you pay directly relates to the size of the home loan, and the size of your deposit.

Depending on how much of a deposit you have to contribute to the purchase or refinance of your property, you may be able to structure your loan facilities in a way that unfortunately will not eliminate the need for LMI but may be able to reduce the rate or premium that you will have to pay.