Lenders Mortgage Insurance

What is Lenders Mortgage Insurance?

LMI, or Lenders Mortgage Insurance, is a type of insurance that protects lenders (such as banks) in the case a borrower defaults on their home loan. It’s typically paid at the time of loan settlement. 

In what situation do you have to pay LMI? 

You typically have to pay LMI when you borrow more than 80% of the property's value. 

Suppose you're purchasing a property valued at $500,000. If you're borrowing $400,000 or more (which is 80% or more of the property's value), you would typically need to pay LMI.

How much do you pay for LMI? 

The amount of LMI you have to pay depends on several factors, including the size of your deposit, the value of the property, and the lender's LMI premium rates. Typically, the higher the loan-to-value ratio (the loan amount divided by the property value) the higher the LMI premium. 

Let’s say you have a $450,000 loan on a property valued at $500,000 with an LMI premium rate of 2%. In this scenario, you would need to pay an LMI of $9000 ($450,000 x 2%).