Posted on: 14th Oct, 2005 03:06 am
The Australia mortgage market is likely to benefit from the Lenders mortgage insurance (LMI) which can create new opportunities for homebuyers. Previously homebuyers had to provide lenders with huge deposits. But with the introduction of the Lenders Mortgage Insurance, lenders get back the amount offered in case of non-repayment of the loan balance. Buyers can also afford to acquire loans with small deposits and that too at low rates.
The LMI applies to all home loans that amount to 80% of the property value. The LMI may also make up for any loss incurred when the lender repossesses the property and sells it. Usually the cost of LMI varies between 1% to 2.5% of the loan amount and is either paid as a one-off borrowing cost or included within the loan amount.
Paying for the LMI premiums is definitely a better option for homebuyers because they no longer have to save a part of their finances to accumulate the deposit amount (20% of purchase price of the property) required by lenders in the absence of the LMI.
The LMI has other benefits too. For instance, a borrower who has refinanced mortgages within the past 1 or 2 years can be entitled to reimbursement on their initial LMI premium. But eligibility for such reimbursements depends on the insurer's and lender's policies and the tax laws. Borrowers can also claim LMI as an annual tax deduction divided equally over 5 years.
The LMI applies to all home loans that amount to 80% of the property value. The LMI may also make up for any loss incurred when the lender repossesses the property and sells it. Usually the cost of LMI varies between 1% to 2.5% of the loan amount and is either paid as a one-off borrowing cost or included within the loan amount.
Paying for the LMI premiums is definitely a better option for homebuyers because they no longer have to save a part of their finances to accumulate the deposit amount (20% of purchase price of the property) required by lenders in the absence of the LMI.
The LMI has other benefits too. For instance, a borrower who has refinanced mortgages within the past 1 or 2 years can be entitled to reimbursement on their initial LMI premium. But eligibility for such reimbursements depends on the insurer's and lender's policies and the tax laws. Borrowers can also claim LMI as an annual tax deduction divided equally over 5 years.
As per my knowledge, LMI is mainly protecting the financiers at the time of non-payment of monthly installments. It also gives encouraging sign to the homebuyers to get the finances easily and enables them to enter into the housing market quickly and that too without paying huge interest rates.
In short, it protects the lenders from borrowers who are sometimes unable to repay their loan. But the eligibility for such type is subjected to the insurer's and lender's policies and tax law.
Thanks
Niicss
[Edited by Jessica, made minor changes. Thanks.]
In short, it protects the lenders from borrowers who are sometimes unable to repay their loan. But the eligibility for such type is subjected to the insurer's and lender's policies and tax law.
Thanks
Niicss
[Edited by Jessica, made minor changes. Thanks.]
Can somebody explain me me what is LMI?
Hi,
Lenders mortgage insurance or LMI is just like permanent mortgage insurance. It is available in the Australia mortgage industry.
It is a type of insurance payable to the lender while taking a mortgage. It is helpful when a borrower is not able to repay the loan amount and the lender is unable to cover all his expenses even after foreclosure. This is for the safety of the lender against any loss.
Hope this information will help you.
Thanks,
Jerry
Lenders mortgage insurance or LMI is just like permanent mortgage insurance. It is available in the Australia mortgage industry.
It is a type of insurance payable to the lender while taking a mortgage. It is helpful when a borrower is not able to repay the loan amount and the lender is unable to cover all his expenses even after foreclosure. This is for the safety of the lender against any loss.
Hope this information will help you.
Thanks,
Jerry
I want to take a mortgage in Australia. I am interested to know more about LMI. any help will be appreciated.
Hi Leonard,
Welcome to the Forums,
The LMI has helped the growth of homeownership in Australia. It helps lenders to offer a higher portion of the purchase price of the residential property as the loan amount. LMI often helps borrowers acquire 95% of the purchase price as loan. This helps borrowers who can afford only low deposits, say 5% to 20% to buy a home within a short time.
Hope you will find this information helpful.
Thanks,
Caron
Welcome to the Forums,
The LMI has helped the growth of homeownership in Australia. It helps lenders to offer a higher portion of the purchase price of the residential property as the loan amount. LMI often helps borrowers acquire 95% of the purchase price as loan. This helps borrowers who can afford only low deposits, say 5% to 20% to buy a home within a short time.
Hope you will find this information helpful.
Thanks,
Caron
is the concept of LMI and PMI same?
Hi Guest
Welcome to MortgageFit forum.
LMI and PMI have indeed similar concepts. Like private mortgage insurance or PMI, the LMI or lenders mortgage insurance (LMI) is payable to a lender while taking out a mortgage loan and paying for it. What is PMI in the United States, is known as LMI in Australia.
When the borrower fails to make monthly payments and the lender cannot recover the costs through foreclosure of the loan and sale of the mortgaged property, the LMI premiums can make up for the loss.
The features of LMI and PMI are almost the same, with both insurances required to be paid if the loan amount is 80% or more of the property value. The borrower can stop paying for each of them when he can build up 20% home equity.
Hope you have benefited from the information.
Regards,
Caron.
Welcome to MortgageFit forum.
LMI and PMI have indeed similar concepts. Like private mortgage insurance or PMI, the LMI or lenders mortgage insurance (LMI) is payable to a lender while taking out a mortgage loan and paying for it. What is PMI in the United States, is known as LMI in Australia.
When the borrower fails to make monthly payments and the lender cannot recover the costs through foreclosure of the loan and sale of the mortgaged property, the LMI premiums can make up for the loss.
The features of LMI and PMI are almost the same, with both insurances required to be paid if the loan amount is 80% or more of the property value. The borrower can stop paying for each of them when he can build up 20% home equity.
Hope you have benefited from the information.
Regards,
Caron.
Hello,
just wanted to know how come different lenders charge different rates of LMI. For example on a $370k purchase one lender is charging approx $6k while another is charging approx $11k. I am confused, is this not regulated?
Thanks
Trish
just wanted to know how come different lenders charge different rates of LMI. For example on a $370k purchase one lender is charging approx $6k while another is charging approx $11k. I am confused, is this not regulated?
Thanks
Trish
Hi Trisha,
This may happen because the insurance company consider a number of factors before providing this policy. The company requires the proof that you can make all loan payments on a monthly basis. It will look into your savings history (you should be able to save 3-5% of your total mortgage costs).
The insurance company shall enquire if the money shown on the loan document as savings has been given to by your parents or if you have received it from another source. Generally insurance companies prefer that you are able to save the 20% deposit that you put towards the home buying.
The LMI is regulated by the Australian Prudential Regulation Authority (APRA).
Thanks,
Sara
This may happen because the insurance company consider a number of factors before providing this policy. The company requires the proof that you can make all loan payments on a monthly basis. It will look into your savings history (you should be able to save 3-5% of your total mortgage costs).
The insurance company shall enquire if the money shown on the loan document as savings has been given to by your parents or if you have received it from another source. Generally insurance companies prefer that you are able to save the 20% deposit that you put towards the home buying.
The LMI is regulated by the Australian Prudential Regulation Authority (APRA).
Thanks,
Sara