Lenders Mortgage Insurance costs Small Fortune
The cost of Lenders Mortgage Insurance has risen from under $6,000 - on a typical $500,000 property loan with a 10% deposit - to almost $9,000 in 2012.
Lenders Mortgage Insurance is charged to borrowers who have a deposit of less than 20%. The idea of the insurance is protection for the bank, and data shows that a quarter of all homebuyers have to pay it.
Because it’s non-refundable or transferable, for those home-buyers who want to refinance with another lender, they’ll have to fork out another LMI fee once again unless they have a minimum of 20% equity in their home.
Consumers and mortgage brokers aren’t happy with the fact that the LMI isn’t transferable, because they say it undermines the Government’s efforts to increase home-loan market competition, and thar people don’t want to switch lenders if they have to fork out an LMI for a second time.
Peter White, president of the Finance Brokers Association of Australia, believes that it should be portable.
A recent survey by Mortgage Choice revealed that more than one third of buyers borrow an excess of 80% of the value of their property.