Mortgage Guarantee Insurance

What is mortgage guarantee insurance?

Mortgage guarantee insurance, often referred to as lenders mortgage insurance (LMI), is a type of insurance that protects the lender if the borrower defaults on their mortgage. It’s typically paid at the time of loan settlement. 

In what situation do you have to pay mortgage guarantee insurance? 

Mortgage guarantee insurance is often required to be paid when borrowing over 80% of a property's value. For instance, if you're buying a $800,000 property and need to borrow $700,000 or more (which exceeds 80% of the property's value), Mortgage guarantee insurance would typically apply. 

How much do you pay for mortgage guarantee insurance?

The amount of mortgage guarantee insurance you pay is determined by various factors such as your deposit size, property value, and the lender's premium rates. Generally, higher loan-to-value ratios result in higher premiums. For instance, if you have a $450,000 loan on a $500,000 property with a 2% premium rate, the insurance payable would be $9,000 ($450,000 x 2%). .