Lenders Mortgage Insurance - LMI

What is Lenders Mortgage Insurance or LMI?

Lenders Mortgage Insurance or LMI was introduced as a way of helping borrowers

who have not been able to save much deposit. With Lenders Mortgage Insurance or

LMI you could buy a property with as little as 5% deposit.

Lenders Mortgage Insurance (LMI) protects the lender or bank in case you default

on your home loan and your property has to be sold at a loss.

An upfront Lenders Mortgage Insurance premium is calculated on a sliding scale

and depends on the amount of your loan and the amount of deposit you have.

You will need to allow for the Lenders Mortgage Insurance premium as part of your

upfront costs, however some lenders will allow you to add the premium to the loan

amount.

Lenders Mortgage Insurance - what is Loan to Value Ratio?

Lenders will often refer to "loan to value ratio" or LVR when they are discussing

Lenders Mortgage Insurance. This is simply the amount of your loan divided by the

market value of your property expressed as a percentage. For example if your

home loan is $360,000 and the market value of your property is $400,000, then the

Loan to Value ratio or LVR is 90%. You would most likely require Lenders Mortgage Insurance.

Lenders Mortgage Insurance - what is Market Value?

Market value when dealing with Lenders Mortgage Insurance (LMI) is the what the bank believes is the true worth of the property. Quite often they will accept the offer and acceptance price as being the market value. If the property is more specialised or they consider that you are paying more than the average price in the area that you are buying, then the bank's market value may be less. Lenders will use their own valuers to determine the "market value" of your property.

Is Lenders Mortgage Insurance the same with all Lenders?

Not all Mortgage Lenders are the same when it comes to Lenders Mortgage Insurance. They each use different Lenders Mortgage Insurance (LMI) companies and have different lending policies. They also each use different valuation methods to determine the market value of your property.

For more information contact us today. If you are ready to buy your home right now click here to apply online.

It pays to talk to an experienced mortgage broker when dealing with Lenders Mortgage Insurance (LMI).

Can Lenders Mortgage Insurance be avoided?

Keystart Low Deposit Home Loans are available to all West Australians purchasing an owner occupied

property in Western Australia who meet the qualifying criteria. You only need to have 4% minimum deposit towards the purchase price of a home, however 2% must be from genuine savings. The remainder can come from any other source, including the First Home Owners' Grant. No Lenders Mortgage Insurance or LMI is payable with Keystart loans which can save you thousands of dollars.

Some lenders do not require Lenders Mortgage Insurance and charge a "Risk Fee" instead. The amount of the Risk Fee depends on the amount of the loan and the equity that you will have in the property.

Another way of avoiding Lenders Mortgage Insurance is to have a family member go guarantor on your behalf. By using equity held in another property you can reduce the LVR to below 80% and therefore avoid the need for

Lenders Mortgage Insurance.

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