Lenders mortgage insurance (LMI)
- LMI helps you buy with a small deposit
- LMI protects lender not you
- Helps you buy sooner
All lenders have limits on how much they will lend you. This will depend on the size of your deposit, the value of the property, and your servicing capacity (based on your income, and how much you are able to repay).
Normally, if more than 80% of the value of the property is required as the loan amount (60% if you're self-employed and seeking a Low Doc loan), then the payment of a once-off Lenders Mortgage Insurance (LMI) charge will be payable. This Lenders Mortgage Insurance cost can be added to your loan amount so it doesn't cost you anything upfront.
Mortgage insurance will often cost more than one per cent of your property value. This insurance doesn't insure you - it insures the lender against the risk that you may not be able to repay your loan.
The advantage of LMI is that you can buy a property with a smaller deposit.