Lenders Mortgage Insurance (LMI) is an upfront fee charged by banks to individuals who seek to borrow more than 80% of their homes value. LMI can be used to borrow up to 95% of your property’s value, meaning you may only have to save up for a 5% deposit.
Essentially, LMI is the way in which your lender protects themselves in situations where they deem there is a chance you may default on your home loan. This charge is not only directed towards low deposit borrowers but also individuals deemed high risk. Those with bad credit ratings or low documentation may also have to pay LMI with amounts as low as 60% of property value.
LMI can be paid in a lump sum before the loan Is given out or it can be incorporated into monthly repayments.