So what exactly is LMI?
Potential buyers often ask me this question, and while I am not a mortgage consultant, I think home buyers, especially First Home Buyers, need to be aware of Lenders Mortgage Insurance (LMI) when budgeting for their new home.
Lenders Mortgage Insurance is there to protect the lender should you, the buyer, default on your mortgage. LMI is a fee charged by lenders when you have a deposit less than 20% of your property’s purchase price, as they feel you are a ‘higher risk’.
Even though this insurance is added directly to your home loan, you need to be aware that this fee will significantly alter your mortgage repayments. Not all lending institutions are the same, so before you apply for your mortgage, make sure you ask the important question of “How much will LMI be on this mortgage?”