How to Avoid Paying Lender's Mortgage Insurance (LMI)

Lender's Mortgage Insurance (LMI) is required in many instances when a loan is worth more than 80 per cent of a property's purchase price, as well as in some other circumstances. 

In very basic terms, when a lender considers a loan to carry a high risk, LMI is likely payable. Here's how you can avoid paying the costly premium.

Here are some tips on avoiding Lenders Mortgage Insurance (LMI) from mortgage brokers, Edge Lending Solutions in Toowoomba.

Save for a higher deposit to avoid Lenders Mortgage Insurance

The purpose of LMI is to protect lenders in case the borrower fails to make repayments and when the loan-to-valuation ratio (LVR) exceeds 80%. When the loan amount is more than 80% of the value of the property being mortgaged, the risk of a lender not recouping their costs, should the borrower default, is increased.

A higher deposit means a smaller loan amount, decreasing the LVR  and the perceived risk.

Get a guarantor to avoid Lenders Mortgage Insurance

If you don't have the financial capacity to meet a 20% deposit but still want to avoid LMI, you have the option to get a guarantor for your loan. Normally a close relative, such as a parent, can  use the equity in their property to help you secure yours. In some instances, having a guarantor on your loan may mean that you won't need a deposit at all.

Take advantage of professional benefits to avoid Lenders Mortgage Insurance

Although special offers based on the borrower's profession are not limited to medical professionals, doctors are the big winners when it comes to waived LMI fees. Due to the perceived stability and high income, some lenders consider professionals earning a minimum of $150,000 a year as 'low risk' borrowers and therefore offer them special loan benefits.

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