Is lenders mortgage insurance really a bad thing?
LMI receives a lot of flak from home buyers. Understandably, most buyers cringe at the thought of paying thousands of dollars in insurance. But, importantly, LMI enables buyers to make a purchase even when they have a small deposit. So, in reality, LMI is a good thing. LMI gives the lender the confidence to lend to borrowers even when they have not saved enough for a 20% deposit. With LMI in place, some lenders will even lend up to 95% of the purchase price.
That said, there are a lot of important things to consider before borrowing more than 80%. So, talk to a Multi Choice Mortgages broker today for free, expert advice on Lenders Mortgage Insurance.
What will LMI cost me?
Quite often, the cost of LMI will change depending on the percentage of the property value borrowed and the total loan amount. The amount can also vary depending on whether your contribution is made up of genuine savings or has come from sources like a gift.
Accordingly, an accurate cost of LMI cannot be calculated until a property and lender have been chosen. That said, LMI is a one-time, non-refundable fee which is paid once the loan has settled. For many lenders, the cost of LMI can be added to the total loan amount.
Is there an alternative to LMI?
The only way to avoid paying LMI is to have the minimum 20% deposit for the purchase. That said, if you know someone who is comfortable going guarantor for the loan – like a parent, friend or relative – you may avoid paying LMI. The guarantor can provide additional security which can be used to lower to total LVR to 80%.
Should I save or should I buy?
This completely depends on your individual circumstances and needs. There is a lot to consider before making any decision. Your Multi Choice broker can help answers any questions you may have regarding LMI and provide you with quotes on what premium you may need to pay.