What is Lenders Mortgage Insurance?
When lending more than 80% of a property's value, lenders require borrowers to take LMI to protect the lender if the borrower were to default. The LMI premium is a one off charge which can be paid for at the time that the loan is funded or added on to the loan amount. Premiums increase as the LVR increases above 80%.
Some lenders will waive LMI on a case by case basis if:
- The LVR is only slightly over 80 %
- No LMI payable for loans up to 90 % for certain professions (doctors, lawyers & engineers)
- Lender has an internal LMI substitute
Borrowers can avoid paying LMI in a number of ways:
- Contributing enough funds through their own savings and gifts so that they are only borrowing up to 80% of the property's value
Provide an additional property as additional security to reduce the LVR to 80%
Have a family member guarantee their loan by providing a property as additional security to reduce the LVR to 80%