LMI - Do I need to pay?
What is Lenders Mortgage Insurance (LMI) and Do You Really Need It?
If you're buying a home in Australia with less than a 20% deposit, chances are you've come across the term Lenders Mortgage Insurance, or LMI. It's one of the most misunderstood costs in the home buying process, so let's break it down simply.
What is Lenders Mortgage Insurance?
Lenders Mortgage Insurance is a one-off insurance premium paid by you, the borrower, that protects the lender (not you) if you default on your home loan. When a lender agrees to lend more than 80% of a property's purchase price, they carry more risk. LMI is how they cover themselves. It's important to understand that LMI offers you zero personal protection, but that doesn't mean it isn't useful.
Does LMI Actually Help First Home Buyers?
Absolutely, and here's why. Saving a full 20% deposit in Australia's property market takes time. For many buyers, that means five or more years of renting while house prices continue to climb. When you do the sums, the rent you pay and the capital growth you miss out on can far outweigh the cost of LMI. Sometimes paying LMI to get into the market sooner is simply the smarter financial move.
Can You Avoid Paying LMI?
Yes!!! And this is where it gets exciting. There are several Federal and State Government schemes designed to help eligible buyers either waive or significantly reduce LMI, including the First Home Guarantee and various state based initiatives. Eligibility criteria apply, so the best way to know exactly what you qualify for is to speak with a Mortgage Broker Noosaville (us) or your local area who can assess your situation and point you in the right direction. Remember, we help clients in Noosa, Coolum, Doonan, Palm Beach, Yeppoon, Brisbane, Calamvale and actually everywhere in Australia….
Talk to The Broker Society
At The Broker Society, we help everyday Australians navigate LMI, government schemes and home loan options every single day. If you're ready to stop renting and start owning, reach out to our team of Noosaville mortgage brokers and let's make it happen.