What is Lender’s Mortgage Insurance (LMI)?

LMI applies when you are borrowing more than 80% of the value of the property being offered as security.  LMI IS NOT income protection, death cover, sickness, accident, unemployment or redundancy insurance.  It protects the lender in the event of you defaulting on the loan and the bank incurring a loss.  Let’s say you lose your job, the loan falls into arrears and the bank is forced to sell your property to recover their debt.  If after selling the property, the bank still has a residual debt of say $20,000, the mortgage insurer pays this to the bank so the bank is off the hook but the mortgage insurer will then pursue you the borrower for the shortfall.

You pay a once only upfront premium which protects the bank for the life of the loan.  The benefit to you is you get a home loan you wouldn’t otherwise qualify for because you don’t have a 20% deposit and the bank in exchange for taking on what they perceive to be a riskier loan get their loan protected.  The amount of the premium is calculated as a percentage of the loan and it escalates rapidly the higher above 80% you go.  Some banks will lend as much as 95% of the purchase price and then allow the LMI premium to be added on to the loan.

Terms and conditions apply.  Please contact us for more information.

337 Rokeby Road
Subiaco
WA 6008

[email protected]
(08) 6380 2377

Peter Gomm & Associates Pty Ltd ACN 088 531 346 T/as Gomm Finance Pty Ltd is a Credit Representative (Credit Representative #396674) of BLSSA Pty Ltd ACN 117 651 760 (Australian Credit Licence #391237)