The LMI fee is generally added to the amount you borrow and is paid at the time of withdrawal. In some cases, you may be able to pay this amount in advance with your own funds; contact us for more information. The NAB said that the premium increases would apply to new loans and applications for changes with the LMI that were filed after 8 p.m. on the afternoon of June 3.The LMI is an insurance policy that covers the mortgage lender against any losses that may be incurred if the borrower defaults on the loan.
The LMI does NOT cover the borrower, it only covers banks and lenders. 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. For many investors, LMI is considered the cost of doing business and, since it is normally recapitalized on the amount of the loan, the impact on monthly cash flow is minimal.
If you don't work in one of these sectors, you may still be able to avoid paying LMI if you're the first homebuyer and qualify for the First Mortgage Loan Deposit Plan (FHLDS). Capitalization is the most common way to pay LMI, and most borrowers opt for the monthly option. Some lenders will allow you to capitalize the LMI on your loan (add the LMI to your mortgage loan) so that you can gradually repay it over time with your mortgage repayments. The LMI gets a lot of criticism because it's so expensive, but the reality is that, without the LMI, many homebuyers would be waiting years (or even decades) to save enough to enter the housing market.
However, if your loan is paid off early, you may be able to get a partial refund of the LMI, depending on the lender. Estimate mortgage expenses, such as mortgage loan applications, monthly repayments, property management, and more. Basically, your lender exempts you from paying the LMI because it recognizes that you work in a safe, well-paid industry that is likely to keep you in reliable employment for many years. Using the Genworth LMI calculator, here's how much the LMI could cost you depending on the value of the property and the size of your deposit.
Capitalizing your LMI commission means adding it to the total amount of the loan and paying it in regular installments with your mortgage loan. When you buy a new home or refinance from a new lender, it's very unlikely that you'll be able to get your LMI refunded. There are some banks and lenders that have a list of accepted professionals, who will consider exempting them or reducing their LMI. Before you apply for a mortgage loan with a lender, it's a good idea to find out how much the LMI might cost you, and the sooner you realize that, the better financially prepared you'll be for it.
If your LVR is still higher than 80% when you refinance or buy a new property, you'll likely have to repay the LMI.