What is it?
LMI is a fee charged by finance lenders. It’s generally charged when you have a deposit which is less than 20% of your property’s purchase price. LMI acts as a security to the lender, who considers borrowers a Higher Risk with less initial deposit/equity. LMI protects the lender in the event that you, the borrower, defaults on their loan.
How much does LMI cost
LMI is usually a once only premium (cost) payable at loan settlement that provides cover for the full term of the loan. The cost will vary depending on how much money you borrow and the size of your deposit. Most lenders allow the premium to be capitalised into your loan or it may also be paid up front. Your Mortgage Broker will be able to calculate the approximate cost.
When to pay LMI
Some lenders require LMI to be paid upfront once your loan has settled; otherwise some lenders, depending on the type of loan advise it’s possible to add the premium to the overall loan amount.
What is the benefit of paying LMI
As it may seem that there is no benefit to you for paying this extra fee to the lender, this one off payment reduces the lenders risk of borrowing which means they can lend a larger amount. People prefer to pay the LMI premium instead of waiting a few more years to save a larger deposit. It gives potential borrower the ability to purchase a home much earlier or buy a better property, than they would otherwise have been able to afford.
How to avoid paying LMI
There are two ways to avoiding paying LMI:
- Save at least 20% deposit
- Have someone go guarantor - an immediate family member who has sufficient cash or equity in their home to secure your loan
Purchasing your first home is often the biggest financial decision you will ever make.
Mortgage Choice Bundall takes the hassle out of finding the right home loan product and a suitable lender for you. Antony Muir; Mortgage Broker will guide you through the entire process and advise you from the beginning what costs you will incur. At no cost to you, Mortgage Choice Bundall is paid by the lender and provides a professional and trusted service.
Mortgage Choice in Bundall, Gold Coast can guide you through your home loan application and provides fantastic aftercare service for the life of your loan, call today 07 5504 5569 or email email@example.com
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