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 20% equity in their home as they will be required to pay lenders mortgage insurance with the new lender.
For example: If a customer had a loan with the Commonwealth Bank they most likely would have paid lenders mortgage insurance when they first purchased the home (presuming they did not have a 20% deposit). If they now wish to refinance to a bank with a cheaper rate and have not built up 20% equity, the borrower will be required to pay the LMI again to the new lender. This is the case even if the Lenders Mortgage Insurer is exactly the same insurer that is already insuring the Commonwealth Bank loan. Ie, if the refinance was from CBA to ING, both CBA to ING use Genworth as their mortgage insurer.
Neither side of politics have commented on this and for many people, the non transportability of LMI is the real bar to refinancing. It is submitted that if its the same mortgage insurer with no increase in loan amount and no change to borrowers or security, then LMI should be transferable from one lender to another.
With LMI costing anywhere from a few thousand to $10,000, borrowers looking to refinance need to ensure they are not again paying LMI, and if they are, that the interest rate saving makes it worthwhile.
Ashleigh StanleyWe’ve had the pleasure of working with Justin Thom to refinance our loans in order to purchase another block of land, and we couldn’t be more grateful for his support throughout the process.
From start to finish, Justin made everything feel straightforward and explained concepts to help us understand the process too. He went above and beyond to help us secure the best possible loan, taking the time to find the right bank and deal to suit our needs. Even when a few hurdles came up from our side, he was very flexible and found solutions for us! He is proactive in his approach, had very clear communication, and was always willing to make time for us.
Justin is very professional, yet we felt he genuinely cared for helping us. We felt completely supported every step of the way and would highly recommend him to anyone looking for a knowledgeable and dedicated broker! We will definitely be using him as our broker from now on.
Kyle MeehanWe had an exceptional experience with Justin. His patience throughout the process was remarkable, always taking the time to explain every detail and answer our numerous questions. He kept us informed at every step and ensured we understood all our options. His support throughout, and post completion, was invaluable, making us feel confident and secure in our decisions. We couldn’t have asked for a better partner in securing our mortgage. Highly recommend!
Ari & Nadene ThomasWe recently worked with Justin refinance our loan. This is the 2nd time working with him and both times have been a pleasure.
Justin has always gone above and beyond to assist us to ensure we get the best possible service. Not only does he show a professional attitude toward his role, but he also shows a genuine interest in our family to assist with our financial matters.
I would have no hesitation in recommending Justin to people important in my life.
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