What is Lenders Mortgage Insurance?
Lenders Mortgage Insurance covers Westpac in the event that you default on your loan. If you have less than a 20% deposit, Lenders Mortgage Insurance is insurance taken out by Westpac and the cost is on-charged to you.
What does Lenders Mortgage Insurance cover?
In the event that you default on your loan, if the proceeds from the property sale are not enough to pay off the loan in full, Lenders Mortgage Insurance will cover Westpac for the shortfall. However, you will still be liable to then pay the shortfall to the mortgage insurer.
It’s important to understand that Lenders Mortgage Insurance is obtained by and covers Westpac, not you. Lenders Mortgage Insurance can be confused with mortgage protection insurance, a different insurance option which could cover your mortgage and/or your mortgage repayments in the event of death, disability, unemployment, or reduced income.
How does Lenders Mortgage Insurance benefit me?
If your deposit is less than 20%, then Lenders Mortgage Insurance is usually required. With Lenders Mortgage Insurance, the lender’s risk in lending to you is reduced. Essentially this means you may be able to apply for a home loan with less than a 20% deposit, which could help you get into your home sooner.
What is the cost of Lenders Mortgage Insurance?
Unlike traditional insurance premiums, the premium for Lenders Mortgage Insurance is usually paid as a one off, non-refundable charge payable prior to or at loan settlement. The cost of Lenders Mortgage Insurance is calculated as a percentage of the loan amount and is also based on the size of your deposit.
How is Lenders Mortgage Insurance paid?
The premium for Lenders Mortgage Insurance is payable by you. Lenders Mortgage Insurance will be taken out by Westpac should your loan require it, with the cost of the premium passed on to you. The Lenders Mortgage Insurance premium can be included either in your upfront costs and paid immediately, or added to your loan repayments so that it’s spread out over the term of the loan. These options can be discussed with your lender.
If you’d like to understand more about Lenders Mortgage Insurance and how we could help you, contact us today.
Things you should know
Lenders mortgage insurance (LMI) is issued to Westpac Banking Corporation ABN 33 007 457 141 (Westpac) by either Westpac Lenders Mortgage Insurance Limited ABN 60 074 042 934, Australian credit licence 388077 a subsidiary of Westpac, or by another LMI insurer. This information does not take into account your personal circumstances. Terms, conditions and limitations apply.
© 2016 Westpac Banking Corporation ABN 33 007 457 141 AFSL and Australian credit licence 233714. The Westpac Group, 275 Kent Street, Sydney, NSW 2000, AUSTRALIA.