We answer the most asked questions below and offer a free no-obligation 20 min conversation to talk through your scenario if you think this loan type might be suitable for you . Enjoy reading this and if you like it, please share or add a comment.
If you don’t have a full 20% deposit plus stamp duty and legal costs, you will usually need Lenders Mortgage Insurance (LMI). Whenever you need to borrow more than 80% of the value of the property being purchased (80% is the Loan to Valuation Ratio (LVR) then lenders usually insist on you having their lenders mortgage insurance protection.
There are often options to either save the insurance totally or at least reduce it, but most people just go to their local bank and take pot luck at their rates and competitiveness. As an example, on a $500,000 purchase of a property in NSW, and with $45,500 savings, mortgage insurance ranges from $14,000 to $28,000.
There are only 2 lenders mortgage insurance companies operating in Australia and both have complex matrices. Lenders also have their own margins added and so insurance can vary wildly, which can totally wipe out any interest rate saving you think you might be getting.
Following is a short summary, if you need the complete explanations go to our complete How-to-avoid-mortgage-insurance page.
Summary of the techniques our brokers employ to reduce lenders mortgage insurance:
1. See if you qualify for a 85% LVR no insurance product (only 1 lender offers it and there are strict qualifying criteria)
2. Use special software tools to calculate the expected insurance across usually 10 – 30 lenders to find the lower ones
3. Match lower insurance premiums to the lender rates to find the best combinations
4. Look at your structure to see how it can be done differently to get you to a lower LMI rate (e.g. sometimes $1,000 from a credit card could reduce you LMI by many thousands
5. Stage the borrowing so that you can reduce insurance now, wait for market growth and paying the loan down before taking the next topup
6. Discuss family pledge products to see if they are suitable for you and your parents/ siblings
7. Calculate the changes if you buy a slightly cheaper or dearer property
8. If you have multiple properties, look to extract redraw or do topup loans to balance out the new property.
9. Last resort, your credit card. This time your card may serve you and save thousands.
Read through the links below for more detailed information, and if you think you may qualify for a loan and would like professional help for no additional fee, email us or book in a free 20 min eligibility call.