Mon, 2008-04-07 12:30 — Guest

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.
The only real benefit of lenders mortgage insurance for a home loan borrower is access to a home loan that would not otherwise be available without lenders mortgage insurance.
Many lenders will allow the mortgage insurance premium to be capitalised onto the loan amount provided that loan to value ratio, LVR, limit is not exceeded.
Mortgage insurance is calculated on a sliding scale which has different percentage brackets for loan size and loan to value ratio, and is then calculated as a percentage of the loan amount.
A lenders mortgage insurance premium cannot be calculated until the loan to value ratio, loan type, loan size and actual lender is known.
When choosing a lender and a loan take care to check the lenders mortgage insurance premium cost. Any benefit of a lower interest rate can be lost for many months or even years if the mortgage insurance premium is more expensive than other options. Only last year a broker found a difference of $10,000 between 2 different mortgage insurance premiums from different lenders for the same home loan.
Generally mortgage insurance is applicable on low documentation loans above 60 percent lvr and above 80 percent lvr on full documentation loans.
There are some higher loan to value ratio options which have a "risk fee" that is put in place by the lender for loans that would traditionally not be accepted by a mortgage insurer.
It is just as important to shop around for lenders mortgage insurance rates as it is to shop around for competetive home loan interest rates if lenders mortgage insurance is applicable.
Next all about a home loan pre approval.