What is it?
LMI is an insurance policy that protects the lender in the event that you default on your home loan. While it’s an additional cost to your home loan, it can allow you to purchase a home with a smaller deposit and avoid the need to save for a larger deposit over a longer period of time.
Here are some ways in which LMI can help you purchase a home sooner:
Faster Savings
Saving for a 20% deposit can take years, especially if you’re paying rent or have other expenses. By using LMI, you can purchase a home sooner and start building equity in the property, which can help you to build wealth over time.
Increased Flexibility
LMI can also provide more flexibility when it comes to purchasing a home. For example, if you’re a first-time buyer and you’re looking to purchase a home in a competitive market, you may not have time to save for a larger deposit before the property is sold. LMI can allow you to purchase the property sooner, which can be particularly beneficial in a fast-moving property market.
Lower Deposit
If you have a deposit of less than 20% of the property value, most lenders will require you to pay LMI. By paying LMI, you can secure a home loan with a smaller deposit, which can allow you to get into the property market sooner. For example, if you have a deposit of 10%, LMI can help you secure a home loan for the remaining 90% of the property value.
LMI, or Lender’s Mortgage Insurance, can often be added to the original loan amount when a borrower is applying for a home loan. This means that the cost of the LMI is spread out over the life of the loan and does not require a significant initial cost outlay. By adding the LMI to the loan amount, borrowers may be able to secure a home loan with a smaller deposit, as the insurance provides protection to the lender in case the borrower defaults on the loan.
In summary, if you’re looking to purchase a home but don’t have a large enough deposit, lender’s mortgage insurance can allow you to get into the property market sooner. By using LMI, you can purchase a home with a smaller deposit, save time, and gain more flexibility when it comes to buying a home.
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