Time to read : 2 Minutes
What is LMI?
You ask is our regular feature where we take common questions Australians are searching for and give a simple, clear answer.
Today's question is about what a bank or lender means when they talk about lenders mortgage insurance or LMI.
And, no, sorry, it's not insurance for you. It's for the bank – to protect them against you defaulting on your loan.
Here's one answer.
Going deeper:
When you buy a property with less than a 20% deposit you will need to pay lenders mortgage insurance.
This isn't great, the bank is essentially saying that you are a risky borrower. It also means that you are going to have to pay more to purchase your property.
The LMI on a $1M home, if you only have a 100K deposit (or 10%) will be around $20K. Yep, that's a lot.
It is a one-off payment expected at the start of your loan, and can be bundled in with your home loan.
Be aware: There are home loans that you can get with very small deposits, but if you do this your LMI will increase in proportion. For example if you get a $1M home and have $50K deposit (or 5%), your LMI could be $50K. Ouch!
