Traditional Lender’s Mortgage Insurance needs to be paid upfront (at loan settlement) and therefore provides a financial impost on borrowers who are already deposit-constrained.
Under Resi Essentials we have Monthly LMI and Family Assistance, several options to make paying LMI more affordable.
MONTHLY LMI
A monthly LMI is an alternative way of paying for Lender’s Mortgage Insurance. Rather than an upfront payment which can equate to many thousands of dollars, a monthly amount is charged following the settlement of the loan. With monthly LMI, the premium stops if you sell the property, refinance the loan, or pay the loan down to a pre-specified Loan to Value Ratio (in our case that is 75%).
Advantages of Monthly LMI
- Homeownership becomes a reality sooner without having to pay for a once-off LMI premium
- The Monthly LMI premium does not affect the LVR being applied for
- Payments cease once the property’s Loan to Value ratio reaches 75%
- Monthly LMI premiums will cease if the loan is refinanced or paid out
- Available for Owner Occupied and Investment purposes
How does it compare to traditional LMI costs?
Traditional LMI provides the lender with coverage for the entire life of the loan (normally 30 years). It is not transferable between lenders and outside of certain circumstances, there are no refunds available for traditional Lenders Mortgage Insurance products. Traditional LMI becomes a sunk cost, even if the intention is to only hold a particular property for a period of 3 – 5 years.
Who does it benefit?
- Borrowers who would normally access 95% plus capitalised LMI, with a competitive interest rate and fee structure home loan.
- Borrowers that may be looking to sell and upgrade their property within the space of 5 years.
- Those that are looking to enter the market sooner and want to maximise their equity contribution.
FAMILY ASSISTANCE
Family Assistance is another alternative to paying LMI. In this case the clients will receive a 15% reduction in their LMI premium if it is paid upfront by a family member at settlement
Benefits include:
- As saving for a deposit can be challenging, this is a great way for clients to seek assistance from their family
- This is available to any client as long as they do not capitalise the LMI on the loan and they have a family member who is able and willing to pay this premium upfront
- This is not just limited to owner occupier loans
*Conditions apply. Applications are subject to credit assessment, eligibility criteria and lending limits. Terms, conditions, fees and charges apply. Offers may be continued, withdrawn, or changed at any time without notice.
