Lenders Mortgage Insurance – What You Need To Know
When you're applying for a home loan, you will be required to put down a deposit. This is usually around five to ten per cent of the property's overall value, although this can vary between lenders.
However, there are some instances where it may be possible to borrow more. In fact, if you're hoping to borrow more than 80 per cent of the property's value then you will be required to take out Lender's Mortgage Insurance (LMI) on your loan.
For example, if you were to default on your home loan, this insurance would ensure that the lender is protected and receives their repayments.
If you're self employed and aiming to take out a home loan, you'll be required to take out LMI if you're aiming to borrow more than 60 per cent of the property's value, due to the greater risk involved with fluctuating income and your ability to make repayments.
This is another fee which must be factored into your overall home loan plans, so be sure to take it into account while calculating your finances or risk getting caught off guard by an extra charge.
However, because of LMI, many home loan providers are willing to lend when you have a relatively small deposit.
For example, if your dream property is going up for auction and you don't have enough time to save up a large deposit, you have the option to take out a home loan and pay the LMI in order to secure your dream.
However, getting in contact with a mortgage broker for professional loan advice would be a wise move to make. Their expertise in loan finance means they will be able to take a closer look at your financial position and make recommendations for your next move.