Mortgage insurance for lenders (LMI) is a single, non-refundable, non-transferable premium added to your mortgage loan. It is calculated based on the amount of your deposit and the amount you borrow. The more you contribute to the purchase price of your property, the lower the cost. The lender's mortgage insurance, or LMI, protects the lender if you don't pay your mortgage loan.
The LMI is an insurance policy that some mortgage loan borrowers must pay. The purpose of the LMI is to protect the lender from financial losses if the borrower is unable to pay their mortgage loan payments. The lender's mortgage insurance (LMI) protects the credit provider if borrowers can't repay their loan. The LMI is usually a one-time cost for the borrower of a mortgage loan, which is paid when the amount borrowed exceeds 80% of the value of the property.
The LMI doesn't benefit the borrower, it only protects the lender. The MPI covers you if you can't meet your mortgage payments due to unemployment, death, or disability. Your agent will be able to suggest different lenders and home loans to help you meet the relevant requirements and get your loan approved more quickly. A deficit occurs when the sale price of your home is not enough to cover the outstanding amount you owe your lender under your mortgage loan.
If the borrower defaults on their loan and the sale of the property does not equal the unpaid value of the mortgage, lenders can apply for the LMI policy to make up the difference. LMI premiums are generally non-refundable, meaning that if you switch your loan to another provider in the future, you generally won't be able to transfer your LMI to another lender. A deficit occurs when the profits from the sale of your home are not enough to cover the outstanding amount you owe to your lender. Under the plan, eligible homebuyers who choose to participate can apply for a loan with a deposit of as little as 5% and will not have to pay the LMI if the lender approves the loan.
Generally, a lender will require you to pay the LMI if your mortgage loan deposit is less than 20% of the total value of your property, that is, if your loan-to-value ratio (LVR) is greater than 80%. Your lender may be able to recover the deficit from the LMI provider, but even if it does, it doesn't mean you're free of problems. However, if you find it difficult to save a 20% deposit, you may still be able to borrow from a lender, but you may need to hire an LMI to reduce the risk for the lender. In addition, by reducing the risk for the lender, the LMI can allow banks and other financial institutions to lend larger amounts and approve more mortgage loan applications.
According to Mortgage Choice's annual Future First homebuyer survey, 72% of prospective first-time homeowners aim to buy within two years of their decision to enter the market. Your mortgage broker will be able to identify not only how likely it is that the LMI will be approved, but also how long the application may take. In this situation, the lender may have to sell your property to recover the cost of your mortgage loan and there could be a deficit.