Check if you pay too much Lenders Mortgage Insurance (LMI)

Did you buy your property off the plan some time ago and has the value of the property increased since then? If that’s the case the following information may be useful to you. By taking proper action you might be able to lower the Lenders Mortgage Insurance premium and save money.

Are you paying too much Lenders Mortgage Insurance

While the market has moved, the lenders are not reflecting the higher values in their loan to value lending ratios. Most lenders will take the purchase price or the valuation or whichever is the lowest. The loan to value ratio determines if you have to pay Lenders Mortgage Insurance. It’s usually a requirement if you can only afford a small deposit. With LMI you can borrow up to 95% of the purchase price of the property.

Banks calculate Lenders Mortgage Insurance based on the property lower value

When the loan of a borrower exceeds 80% of a property’s value (Loan to value ratio > 80%) and lenders mortgage insurance (LMI) is required, borrowers have a distinct disadvantage because the LMI premium is calculated on the lower value of the property.

With the upward movement of the property prices a lower lender’s insurance premium is something to be considered by your lender.

Request your lender to use a current valuation

We encourage borrowers to request that a current valuation be used, which could potentially save you thousands of dollars in LMI premium.

Get in touch with us if the above situation applies to you and we will give you an indication if you can save money on your loan and LMI.

Learn more about the loan to value ratio.