What Home Buyers Need to Know
Buying your first home is a big step, and for many Australians, saving a 20% deposit can feel like a major hurdle. That’s where Lenders Mortgage Insurance (LMI) comes in. But what exactly is it, and how does it affect your home loan?
Let’s break it down.
What Is Lenders Mortgage Insurance?
LMI is a type of insurance that protects the lender (not you), if you default on your home loan. It’s typically required when your deposit is less than 20% of the property’s value.
While it can help you get into the market sooner, it’s important to understand the costs and implications.
How Much Does LMI Cost?
The cost of LMI varies depending on your loan amount and the size of your deposit. It can range from a few thousand dollars to tens of thousands.
Tip: Use an online LMI calculator or speak with Your Village Mortgage Brokers to get an estimate based on your situation.
Can You Avoid Paying LMI?
Yes, there are a few ways to avoid LMI:
- Save a 20% deposit
- Use a guarantor (usually a family member who offers their property as security).
- Access government schemes like the First Home Guarantee, which allows eligible buyers to purchase with as little as 5% deposit without paying LMI.
- Some eligible Professions may have LMI Waived Some lenders offer LMI waivers for certain professionals due to their stable income and low risk profile.
Tip: We can help you explore these options and see if you qualify.
Should You Pay LMI to Buy Sooner?
In some cases, paying LMI might be worth it if it means getting into the market earlier, especially if property prices are rising faster than you can save.
Tip: Consider the trade-off between paying LMI now versus waiting to save a bigger deposit. We can help you run the numbers.
Can LMI Be Added to Your Loan?
Yes, most lenders allow you to capitalise the LMI premium into your loan, meaning you don’t have to pay it upfront. However, this will increase your loan amount and the interest you pay over time.
Need help navigating your deposit and LMI options?
At Your Village Mortgage Brokers, we’re here to help you make informed decisions and find the right path to home ownership. Book a free consultation today and let’s explore your options together.
