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Lenders mortgage insurance is an insurance policy which covers a lender for any unrecoverable loss which may occur as a result of providing a home loan.

The usual scenario used to be that lenders would not offer to lend any more than 80 percent of the valuation of a property which provided a 20 percent buffer should anything occur where borrowers could not repay a loan.

If borrowers could not repay a loan and a property was sold to recover the debt the lender could theoretically afford to sell the property quickly at up to 20 percent below market value and still recover their money.

Citibank have announced that from 14 April 2008 Citibank will no longer pay the Lenders Mortgage Insurance premium for new Self-Certified loans. Instead, new Citibank customers will be required to meet this cost. Citibank continue to provide a wide range of valuable benefits to all Self-Certified customers including:

• A simple, streamlined application process
• A wide choice of self-certified loans including fixed, variable and interest-only options
• Option to step down interest rate (conditions and fees may apply).

Lenders Mortgage Insurance, often referred to as LMI, is an insurance policy a bank or lender requires a borrower to pay to cover the home loan if the risk of a home loan exceeds the lenders credit policy.

Mortgage insurance premiums in Australian lending are a one off cost payable at the time of home loan settlement by the borrower.

The mortgage insurance premium is an insurance cover for the lender if there is ever a loss as a result of the home loan not being repaid.