Lenders' Mortgage Insurance (LMI) can come as a surprise cost for Australian home buyers with low deposits. But it also lets you enter the property market without saving a 20% deposit, making LMI a lifesaver for many first time buyers.
What is lenders' mortgage insurance?
Lenders' mortgage insurance is a type of insurance that protects the financial institution providing you with a home loan.
Today, in Australia, many first home buyers need to pay LMI. Some people looking to upgrade their current home or grow their investment portfolio will also pay LMI, too, though it's less common.
Opting to use LMI can also speed up the buying process. You don't need to save up a huge deposit, which can make it easier for you to get onto the property ladder or buy your dream home.
You're also still able to have lender choice, even if you use LMI. And you're still able to choose a loan that suits your needs.
For example, QBE offers LMI through a range of its partners – you can see them in the section below.
Most lenders want a borrower to save a 20% deposit. If you're buying a home that costs $800,000, that means you'd need a deposit of $160,000.
But some lenders will happily accept a borrower with a 10% deposit. If that's the case, you could buy an $800,000 home with just $80,000. That's half the size of the 20% deposit and a much more realistic amount for many first home buyers.
In order to get a loan with a much lower deposit, your lender will charge you an LMI premium. While LMI is an additional cost when buying a property, it lets buyers enter the property market faster. That can be a great benefit for some buyers.
How can LMI help you purchase a home?
Allows you to borrow with a deposit of less than 20%
Lets you get a foot on the property ladder more quickly.
Enables you to spend less time saving and more time paying off your property.
Use the LMI calculator
The LMI calculator below will give you an idea of how much cost LMI can add to your loan. Input the amount you plan to borrow, along with the price of the property you're looking at purchasing. An estimation will work too, if you don't yet have the exact amounts.
Helpful articles and resources for first home buyers
SPONSORED: Refinancing can be an effective way to save cash on your home loan – but there are a range of different factors to weigh up before you proceed.
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Written by
Richard Whitten
Richard Whitten is a money editor at Finder, and has been covering home loans, property and personal finance for 6+ years. He has written for Yahoo Finance, Money Magazine and Homely; and has appeared on various radio shows nationwide. He holds a Certificate IV in mortgage broking and finance (RG 206), a Tier 1 Generic Knowledge certification and a Tier 2 General Advice Deposit Products (RG 146) certification. See full profile
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