WHEN borrowing more than the 80% of the value of the property most banks and financial institutions require LMI.
This is added to the cost of the loan.
Essentially this gives buyers the opportunity to purchase a property with a smaller deposit.
As the name suggests mortgage insurance protects the lender if the borrower was to default and the property sells for less than the outstanding balance on the loan.
The borrower remains liable for any balance owing under the contract even if the insurer has paid that amount to the lender.
A repayment of the loan within a 2 year period may be eligible for a partial refund of the LMI charge.
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