Lenders Mortgage Insurance FAQs
Achieving the dream of homeownership is one of the most exciting accomplishments in life. It is also one of the largest investments you may ever make. Lenders Mortgage Insurance is one option that allows you to get into your own home sooner.
What is Lenders Mortgage Insurance?
Lenders Mortgage Insurance is one way of getting into homeownership without having the 20% deposit which is typically required by most banks and financial institutions.
With Lenders Mortgage Insurance, lenders may allow you to borrow a higher proportion of the purchase price, allowing you to purchase a property with a smaller deposit than would otherwise be required. It may also enable you to borrow at an interest rate that is comparable to a borrower who has a larger deposit.
Who is insured?
The lender is the insured party, not you, the borrower, nor any guarantor. Where a claim for loss is paid to a lender, Genworth may seek recovery from you, or any guarantor, for any shortfall amount.
Lenders Mortgage Insurance should not be mistaken for Mortgage Protection Insurance, which covers your mortgage in the event of death, sickness, unemployment or disability.
Why does my loan require Lenders Mortgage Insurance and how can it benefit me?
Achieving the dream of homeownership is, for many people, one of the most exciting accomplishments in life. It can also be one of the most difficult challenges due to the length of time it takes most people to save the traditional 20% deposit and the sacrifices they make through the process.
For over 50 years, Genworth and its predecessors have assisted Australians with this challenge by providing Lenders Mortgage Insurance.
By reducing a lender’s risk at the outset, Lenders Mortgage Insurance allows borrowers to secure a mortgage for a home or even their second home or property with a deposit as low as 5%. This takes much of the difficulty out of saving a deposit.
What costs are involved?
Unlike traditional insurance products, there is a one-off premium payable for Lenders Mortgage Insurance. This premium is charged by the Lenders Mortgage Insurance provider to the lender, who typically passes this cost on to the borrower. The premium is payable when the loan funds are advanced and it provides cover for the full term of the loan.
The cost of Lenders Mortgage Insurance varies depending on a number of factors, including but not limited to; the amount of the loan, the level of your equity in the security property (how much of your own savings you contribute to the purchase) and the level of risk associated with the particular loan product you choose.
Some lenders will allow you to add the cost of the Lenders Mortgage Insurance premium on to your loan, meaning you will not have to pay this amount upfront. Your loan repayments will increase marginally to cover the cost of the Lenders Mortgage Insurance premium.
Is the premium refundable?
A partial refund of the Lenders Mortgage Insurance premium may be applicable if the loan is repaid within the first two years. Sometimes a partial refund is not payable as a lower Lenders Mortgage Insurance premium may have been charged to you upfront. This varies by lender, so please speak to your lender to find out what arrangements they have in place.
How is Lenders Mortgage Insurance arranged?
Your lender or broker will prepare all the necessary information and documentation and will advise you whether or not your loan requires Lenders Mortgage Insurance, the cost of the premium and any additional information that may be required.
What can I do if I’m having difficulty meeting my mortgage repayments?
A lot of people face unforeseen challenges in their life or their circumstances may change unexpectedly. This can often mean you may experience difficulties in meeting your mortgage repayments.
If this happens to you, the most important thing to do is to contact your lender immediately. There are a number of ways your lender can assist you if you are experiencing hardship, and it is always best to contact them early.
Genworth, as well as your lender, has programs in place to assist you if you find yourself in financial hardship.
For more information
The LMI Toolkit on the Genworth website contains tools and resources that will assist you to better understand Lenders Mortgage Insurance and the mortgage market. Among these resources are case studies, fact sheets and videos that further explain Lenders Mortgage Insurance, the process of buying a home, and information of what you should do if you find yourself in financial hardship.