Lenders Mortgage Insurance
18 Mar 2023
Lenders Mortgage Insurance (LMI) is an insurance policy that protects the lender in case the borrower defaults on their loan. In Australia, you may have to pay LMI if you are borrowing more than 80% of the property value or if you have a poor credit score. Here are a few ways to save on LMI:
- Make a larger down payment: One of the easiest ways to avoid paying LMI is to make a larger down payment. By putting down more than 20% of the property value, you will avoid having to pay LMI.
- Use a guarantor: Some lenders allow the use of a guarantor to secure the loan, which can help you avoid LMI. A guarantor is a person, typically a family member, who agrees to be liable for the loan if you are unable to repay it.
- Use a mortgage offset account: A mortgage offset account is a savings account linked to your home loan. It reduces the interest you pay on your home loan by offsetting the balance of the account against the loan balance. Some lenders may use the balance in an offset account as part of the deposit, which can help you avoid LMI
- Shop around for lenders: Different lenders have different LMI policies and rates, so it’s worth shopping around to find the best deal.
It is important to consider your specific financial situation and goals before deciding on how to save on LMI. It is also recommended that you consult a mortgage broker or a financial advisor to determine whether LMI is a good idea for you and what are the best options that fit your need