What is Lenders Mortgage Insurance
Lenders Mortgage Insurance (LMI) is a once off insurance fee that protects the bank in the event that you default. It is paid when your loan is disbursed (settled) and does not have an effect on your interest rate. Generally speaking the lenders mortgage insurance is added to the loan (capitalised), which means you don’t need to cover the initial outlay when starting up.
Banks require lenders mortgage insurance for high risk loans, for example borrowing a high percentage of the property value. As a general guide when lending over 80% of the property value (also known as loan to value ratio) the lenders mortgage insurance will become applicable. For self employed clients wanting to apply for a low doc loans, due to not being able to prove income, then lenders mortgage insurance will apply once lending over 60-70% of the property value. The premium charged by the insurer varies depending on the loan amount and the property value.
There is no need to arrange this insurance as it’s all taken care of by the bank during the application process. Some lenders will waive the requirement for lenders mortgage insurance, generally speaking this is on a case by case basis.
We can tell you if LMI can be waived for your mortgage!
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