When Australians take out home loans for the first time there are a number of additional charges that can be missed by the unsuspecting – or the un-researched! These charges can mount up and add significant monthly payments to loans.
One example of a non-government charge you may have to pay is Lenders Mortgage Insurance (LMI) and we take a closer look below.
Lenders Mortgage Insurance (LMI)
Mortgage insurance is usually payable in Australia for loans that are more than 80% of the value of the home; that is to say, where the borrower has not paid a deposit of 20% or more. This accounts for the majority of home loans for first time buyers.
It protects the lender, not you, and is designed as a layer of protection if your house becomes repossessed; this is despite default rates in Australia being very low, even amongst first-time buyers.
In Australia it is usually provided by one of just two companies:Genworth Financial and QBE Lenders’ Mortgage Insurance.
It is a one-off premium but most lenders include it in the loan repayments and a typical example follows:
