The Two Sides Of Lender’s Mortgage Insurance

Lender’s Mortgage Insurance is insurance payable to a lender as a requirement for mortgage loans. This is dependent on the loan amount and the Loan to Value Ratio. This protects lenders in the event a borrower incurs a default. The LMI for the past several years have consistently increased. According to the Mortgage Experts Online, for 90% LVR loans, the LMI has almost doubled for the past 5 years.

Looking at it from both the borrower and the lender’s perspective, is this really of any benefit?

For the lender, it gives them the security and protection in case a default occurs. But for the borrower – assuming that he intends to purchase a $700,000 property has to shell out approximately $28,500 in LMI, in addition to legal fees and stamp duty, estimated at $30,000.

From the example, this obviously is a one sided benefit. With a huge portion of the loan going to these expenses, the buyer is burdened to pay that much before even getting to the property loan.

Brokers have called for more competition in the lending industry, as this will allow borrowers to have a wide array of choices in lenders which would fit their financial capacity.

Read more about this on the Broker News website.