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Lenders Mortgage Insurance

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Lenders Mortgage Insurance (MLI) is something we commonly see in our property dealings at Sandhurst

Whilst it’s easy to complain about having to pay Lenders Mortgage Insurance, the truth is it allows many potential home buyers to achieve their buying goals.

LMI is a premium that borrowers pay to protect the lender against potential default on the home loan. Calculating LMI is usually done on a sliding scale and is often a percentage of the borrowed amount. Many lender websites have LMI calculators that can provide buyers with a basic figure.

Many people ask why they must pay the insurance when it’s the lender that is being insured. But, while the benefits may be initially more apparent from the lender’s perspective, both parties benefit in one way or another. For example, a couple may have a sufficient joint income to easily cover their mortgage repayments on their dream home, but may not have a large enough deposit to qualify for a home loan under their own steam. However, depending on the size of their deposit, they may still qualify for a home loan thanks to LMI.

In most cases, the only way to avoid paying an LMI premium is to wait until you have a deposit of 20% or more before looking for a loan. Although this will save you having to pay LMI this approach may also mean missing out on the perfect property or the right time to enter the home loan market.

Most informed borrowers, therefore, view lenders mortgage insurance as an unwanted but necessary cost.

Always speak with a financial expert to understand the option that is best for your individual circumstances.

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