• 97.5% Home Loan – Capitalise LMI in Full
  • 95% LVR capitalise Lenders Mortgage Insurance
  • What is Lenders Mortgage Insurance?
  • How much is lenders mortgage insurance?
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What is Lenders Mortgage Insurance?


What is Lenders Mortgage Insurance?


Saving up for a 20%, 30%, or even 40% deposit for a home loan can be difficult with the rising cost of living these days, or if you do not have genuine savings. Fortunately, you can borrow as much as 95%, or even 97% or 98% of the purchase price of a home, and in some cases, you may even be able to borrow this much if you do not have genuine savings. So, if you are looking for a home loan that will cover more than 80% of the price of your new home, you will probably need to ask the question: “What is lenders mortgage insurance?”


Explaining lenders mortgage insurance


So what is lenders mortgage insurance? LMI is insurance that covers the lender in case of the borrower defaulting on their home loan. Unlike personal insurance policies, which are paid periodically, LMI is a one-off payment that is usually required when you borrow more than 80% of the property value.


In other cases you might still need to have LMI, even if you are borrowing less than 80% of the property value. For example, if you are self-employed and do not have sufficient paperwork proving your financials, your lender might require LMI if you are borrowing 60% or more of the property value.


How do I pay for LMI?


Lenders mortgage insurance is usually paid as a one-off fee via a deduction from the loan funds when the loan is approved and forwarded to you. Sometimes you can have the insurance capitalised with your loan, which allows you to effectively borrow it.


Do I need genuine savings for a loan that attracts lenders mortgage insurance?


The genuine savings rule requires that you have your deposit held in an account (or shares and other allowable forms) without a reduction in the value of your funds for at least three months. In some cases, the lender might be happy to approve your loan even if you do not have the full amount of your deposit held in genuine savings. Lenders have been relaxing their borrowing requirements in recent times, so you could have the genuine savings rule waived depending on your circumstances.


If you do not have genuine savings for your deposit, you might be able to fund it from a cash gift from friends or family, a tax refund, the sale of an asset such as a car or boat, a windfall, or some other means. This can make it much easier for you to get your deposit together and buy the property of your dreams.


Are these types of loans more expensive?


The good news is that if you are borrowing more than 80% of your purchase price, you will usually not need to pay a higher rate of interest. Additionally, all the standard features and options will apply, so that you can request a variable or fixed rate, or additions such as an offset account or withdraw facility.


How do I apply for lenders mortgage insurance?


So, what is lenders mortgage insurance? Well, we hope we’ve answered that question satisfactorily, but we will be happy to discuss it further. Contact ABC Mortgages today for a free phone consultation. We will be happy to assess your loan eligibility, and whether LMI will apply in your case.