Lenders Mortgage Insurance: What is it and why did they decline my non-resident home loan? This article explains what Lenders Mortgage Insurance (‘LMI’) is. The article then provides information on when a home loan can be approved greater than 80% LVR (ie, with LMI approval). What is Lenders Mortgage Insurance? Lenders mortgage insurance is insurance that protects the bank in the event of buyer default. The easiest way to explain it is to compare it to a person insuring their car. In the event of an accident or theft the insurance company will pay out the car owner to either fix the car or buy a new car. LMI is similar in that it pays out the bank should the borrower default on the mortgage and the bank makes a loss. Are all home loans mortgage insured? No. As a generally rule only loans that are greater than 80% LVR (‘Loan to Value Ratio) are mortgage insured. A borrower with… Read More
My Mortgage Application Declined by LMI: What to do if your Home Loan was Declined by the Lenders Mortgage Insurer.
MAP has had a few clients lately who have applied directly to their lender or through another mortgage broker and been advised that the bank would happily lend to them however their lenders mortgage insurer would not due to their temporary residency or expat status. The result of this is that the home loan application will be declined as the bank will not, without Lenders Mortgage Insurance, agree to approve the mortgage. This article outlines what lenders mortgage insurance is and how to avoid such a situation. What is LMI? LMI is insurance that protects the bank when a borrower does not have a full 20% deposit. Essentially, it covers the bank should the borrower fail to pay the mortgage and the bank makes a loss on sale. LMI is, as a rule, only applied to home loans with an LVR of greater than 80%. It is insurance that protects the bank, not the borrower. LMI is just like car… Read More
Lenders Mortgage Insurance (‘LMI’) – the real reason why many borrowers can not refinance to a cheaper interest rate
After the recent decision by the major banks to lift interest rates above the Reserve Banks cash rate, the government has responded with measures designed to make it easier for customers to change lenders. These measures have operated to reduce early exit fees which generally cost around $700 when the loan is paid out in the first 3-4 years. However, the problem is not the early exit fees but rather the non transportability of Lenders Mortgage Insurance which has not even been mentioned by either side of politics Lenders Mortgage Insurance is charged when a borrower has less than a 20% deposit or equity in their existing property. It is a once off upfront fee and is designed to protect the lender against a bad debt. There are two lender mortgage insurers in Australia being Genworth and QBE and different banks will use one of these two insurers. The issue arises for borrowers when they want to refinance without having… Read More
