Lenders Mortgage Insurance is taken out by the bank to protect their interests in the unlikely event that you default on the home loan. Lenders Mortgage Insurance is a one off premium paid at settlement and while it directly does not affect your interest rate, some lenders now offer lower rates for non Lenders Mortgage Insurance Loans.
Typically you will require Lenders Mortgage Insurance if you are borrowing more than 80% of the property value or if you borrow more than 60% of a Low Doc Loan.
Lenders Mortgage Insurance can be added to the loan but this means you end up paying interest on the premium and this if possible should be avoided.
One of the most common questions asked of mortgage brokers is should I save a larger deposit or pay the Lenders Mortgage Insurance. While there is no hared and fast answer consider the fact that property prices are rising and to avoid the premium you need a 20% despot. So if you purchased a property for $300,000 you need a 20% deposit which is $60,000 and to cover Government fees which in Victoria can be as high as $16,000. That means you need $75,000.
So whether you pay the Lenders Mortgage Insurance or save the deposit will really depend on your personal circumstances.
Contact your mortgage broker What If We Finance to find out more today.