Learn about Lenders Mortgage Insurance

What is it, how it works, do you need it and why it is important.

 

What is LMI?

Lenders Mortgage Insurance (LMI) might help you to get into the property market where there is a higher risk for the lender. This could be due to:

  • Having less than a 20% deposit
  • Purchasing a property in a high density postcode
  • Refinancing a home loan for a security property in a high density postcode.

LMI protects the lender against the higher risk of lending to a customer that doesn’t have a full deposit amount saved, with some lenders accepting as low as a 5% deposit.

The cost of LMI is passed through to you, the borrower. The LMI premium can usually be added into your principal loan amount.

It’s important to distinguish that Lenders Mortgage Insurance is not mortgage protection insurance.

LMI is explicitly designed to protect the lender, while Mortgage Protection Insurance protects you, by covering your mortgage in the event of sickness, unemployment, disability or death.

How does it work?

If the property you’re planning to purchase is located in a high density postcode, we may require a 30% deposit to reduce the risk associated with your purchase.

Don’t worry, if you have a 20% deposit you may still be approved for the loan, but an LMI cost will be applicable. You don’t need to pay this amount upfront because it can be added to your home loan amount.

Who provides LMI?

Genworth Financial Mortgage Insurance Pty Ltd (Genworth) is our Lenders Mortgage Insurance provider, which means they’re the ones that receive the LMI premium from the lender.

They’re also the ones that the lender will make a claim on in the event of an associated loss should a customer’s property be sold and the home loan isn’t fully repaid from the proceeds of the sale.

Because Bendigo and Adelaide Bank fund our home loans, the risk associated with a low deposit home loan is transferred from Bendigo and Adelaide Bank, to Genworth.

Please note that Genworth is a shareholder of TicToc Online Pty Ltd, who provide credit services for Aussie Online home loans.