Lenders Mortgage Insurance Let’s get something clear at the outset. Lenders mortgage insurance has absolutely nothing to do with Mortgage Protection Insurance or Sickness and Accident Insurance.
Lenders Mortgage Insurance is all about the lender protecting itself against a possible loss on the sale of the property, not protecting you.
OK. So how does it work?
Let’s get something clear at the outset. Lenders mortgage insurance has absolutely nothing to do with Mortgage Protection Insurance or Sickness and Accident Insurance.
Lenders Mortgage Insurance is all about the lender protecting itself against a possible loss on the sale of the property, not protecting you.
OK. So how does it work?
When you are borrowing more than 80% of the purchase price or valuation of the property the lender will require Mortgage Insurance and as a general rule they will add the one off premium to the amount you are borrowing. The actual amount of the premium will depend on the lend to valuation ratio and the amount of the loan. Simply put the cost on a 85% borrowing will be less than say a 95% borrowing and similarly the lower the amount of the loan the less the premium. Your Select broker will be able to give you a quote on the cost once the cost price and the amount of your deposit are finalised but be aware it will run in to thousands of dollars.
Assuming you meet all the other lending guidelines the lenders first response might be “loan approved subject to Mortgage Insurance”. This means the lender has now submitted your application to the insurer who will undertake pretty much the same checks and balances as the lender. In due course the insurer gives their approval to the lender who in turn now gives you unconditional approval which includes the amount of the insurance premium which you will have to pay.
The bottom line is that you are paying a premium to protect the lender from any loss. And, if you have read our blog on refinancing you will be aware the insurance is not transferable to another lender when refinancing.
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