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The Pros and Cons of Lender’s Mortgage Insurance

Better Loan Solutions in Mornington PeninsulaLearning CentreInsights

The Pros and Cons of Lender’s Mortgage Insurance.

As the value of homes has steadily increased over the years, more borrowers have turned to Lender's Mortgage Insurance (LMI) to help get them onto the property ladder. 

However, many borrowers are often confused about Lender's Mortgage Insurance, who and what it actually protects and what the benefits might be. 

Lender’s Mortgage Insurance is a one-off upfront payment applicable when a borrower is unable to provide a 20 per cent deposit. LMI can be an incredibly valuable tool if you have the borrowing capacity to purchase a property, but you’re only able to provide a smaller deposit.

Lenders normally like to see a 20 per cent deposit because this protects them in the event the value of the property falls, the borrower runs into financial trouble and defaults on their loan repayments. If a lender had to sell the property, they are taking on more risk if the borrower didn’t have an equity buffer in place.

Advantages of LMI

Disadvantages of LMI

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