The LMI consists of a single down payment, which becomes payable when the borrower has a deposit of less than 20% of the price of the home. The borrower pays the fee to the lender at the time of liquidation, who then pays the insurer and the policy is valid for the life of the mortgage, regardless of its duration. Lenders' mortgage insurance (LMI) premiums are paid in two ways: a down payment or through capitalization. Capitalizing your LMI premium basically means adding it to the total amount of the loan and paying it in regular installments with your home loan.
The LMI is a single, non-refundable payment that must be made at the time the loan is liquidated. You can pay the amount in advance, or you can ask the lender to add it to your total loan and cancel it while you make your loan payments. You'll pay the cost of the LMI premium along with your mortgage loan repayments if it's capitalized. The LMI is required when the borrower has a deposit of less than 20% and the loan-to-value ratio (LVR) of the loan is greater than 80%.
The LMI can be a very useful tool for borrowers if they don't have a 20% deposit and want to enter the real estate market sooner. This means that if you have problems with your reimbursements, you won't be able to file an LMI policy claim on your behalf. Basically, the higher the loan amount and the more you borrow against collateral, the higher the LMI you'll have to pay. It is usually an investment property that is used as collateral and reduces the LVR to 80%, allowing you to avoid paying the LMI.
Entourage has a team of expert mortgage brokers with experience in helping borrowers who need an LMI loan. Once you understand how much the LMI is likely to cost, the lender will calculate the loan based on the amount you are borrowing, minus your deposit, plus the LMI. That said, there are some professions that can be approved for up to 95% of LVR without having to pay any LMI. The LMI can be paid in advance when you pay off your mortgage loan, or it can be paid monthly as part of your mortgage loan repayments.
By capitalizing on the LMI premium, you can get approved for a mortgage loan with a lower deposit, since you don't need to pay the LMI up front. The LMI is non-refundable, which means that even if you can apply for a 30-year loan and return it after just 10 years, you won't receive any reimbursement in the form of a premium repayment. If you refinance and your LVR is greater than 80%, the LMI will be repaid in the total amount calculated on the amount of the loan at the time of the application.
