What is Lenders Mortgage Insurance and is it required?
Lenders Mortgage Insurance (LMI) is a policy that protects your bank or lender, rather than you, if you default on your home loan. In Australia, LMI is typically required if your deposit is less than 20% of the property’s purchase price (i.e. an 80% Loan-to-Value Ratio).
Unless you are in a position to borrow at least 80% of the value of your home, then you will need to purchase an LMI policy.
The cost of an LMI policy depends on several factors: the value of your deposit, the total amount you are borrowing and whether you are living in the property or using it as an investment. Each lender is different though, so ensure that you check all policy details before taking out a home loan.
Government schemes, if available at the time, may be utilised to bypass LMI. Please thoroughly check your eligibility, if you choose to explore this option.