50% of borrowers may not understand Lenders Mortgage Insurance
5/3/2024
A significant number of borrowers are unclear about Lenders Mortgage Insurance (LMI), according to a recent survey of mortgage brokers by LMI provider Helia.
The survey found that 85% of broker respondents think LMI can benefit buyers who want to get into the market earlier, while 70% believe it can also help renters who want to transition into ownership. However, 50% of respondents feel borrowers generally don’t properly understand LMI.
LMI is a form of insurance that protects the lender in case the borrower defaults on the mortgage and the lender can’t recover the loan from selling the home. The premium varies, depending on the size, type and location of the property.
Lenders generally insist borrowers take out LMI if they want to buy a property with less than a 20% deposit – although, for some professions, such as doctors and lawyers, it’s possible to buy a property with a smaller deposit without paying LMI.
The upside to using LMI is you can enter the market with a smaller deposit; the downside is the cost.
I’d be happy to discuss both the potential benefits and costs, so you can make an informed decision about whether LMI is right for your personal situation. If you'd like to learn a little bit more before we chat, please have a look at our blog post on LMI here.
