What is LMI?
This is a Frequently Asked Question so we have added it to the Majestic Property FAQ’s page, link below
LMI (Lenders Mortgage Insurance)
LMI is an additional fee charged by banks when you borrow more than 80% of the value of a property. This fee is charged because the bank is outsourcing insurance to protect themselves from the risk of higher lending ratios, in case of a default on the loan. In most situations LMI shouldn’t be a deterrent if you are purchasing a growth asset like property. Over time it is expected that the increase in wealth from the property will be significantly higher than the cost of LMI. I have personally seen banks charge anywhere up to $20,000 or more for LMI depending on the financial position of the applicant. This is not always a fixed fee, although it is perceived that way.
I would highly recommend that you seek advice on ways to reduce LMI before signing loan contracts with a bank.