{"id":5503,"date":"2024-10-31T10:36:34","date_gmt":"2024-10-31T00:36:34","guid":{"rendered":"https:\/\/financialplus.com.au\/?p=5503"},"modified":"2024-10-31T10:36:34","modified_gmt":"2024-10-31T00:36:34","slug":"how-much-does-lmi-really-add-to-a-homes-cost","status":"publish","type":"post","link":"https:\/\/financialplus.com.au\/how-much-does-lmi-really-add-to-a-homes-cost\/","title":{"rendered":"How much does LMI really add to a home\u2019s cost?"},"content":{"rendered":"

\"\"Saving for a 20% house deposit is like house training a wilful Labrador. It requires plenty of patience and persistence. Not your thing? You could take out lenders mortgage insurance (LMI). But how much extra does that cost? And can you avoid paying for it? (for the LMI, not the dog\u2026)<\/strong><\/p>\n

LMI is a type of\u00a0insurance that protects the lender<\/a>\u00a0(not you or any guarantors) if you can\u2019t keep up with your home loan repayments.<\/p>\n

It\u2019s typically applied to home loans when your deposit is less than 20%. And right now, that\u2019s the case for many home buyers.<\/p>\n

A recent\u00a0Mozo study<\/a>\u00a0found 84% of Australians saving a deposit can\u2019t currently afford the full 20% deposit needed to avoid LMI \u2013 in no small part due to increasing property prices.<\/p>\n

In fact, the national median property price is now $973,300, up from $949,400 in December last year and $649,300 in June 2019<\/p>\n

So, let\u2019s shed a light on how much LMI can cost \u2013 plus ways to make the expense more manageable or possibly disappear altogether.<\/p>\n

How much LMI could I pay?<\/h3>\n

LMI typically works out to about\u00a01% to 2% of your loan value<\/a>, depending on the size of your deposit and the size of your loan.<\/p>\n

The more you can stump up as a deposit, the lower the LMI premium can be.<\/p>\n

We\u2019ll use this\u00a0handy LMI estimator<\/a>\u00a0to show how it works (feel free to give it a go yourself).<\/p>\n

Let\u2019s say you\u2019re buying an apartment costing $500,000. If you have a 10% deposit of $50,000, LMI will likely cost around $8,680.<\/p>\n

It all depends on the price of the property you\u2019re buying and your deposit amount. For example, the LMI premium can be as high as $36,480 if you have a $150,000 deposit for a $1,500,000 home.<\/p>\n

The good news is that there are ways to manage \u2013 and potentially even bypass \u2013 LMI. Here are three ideas to consider:<\/p>\n

1. Talk to us<\/h3>\n

Unlike other types of insurance, you can\u2019t shop around for the cheapest LMI provider. Your bank will organise cover and let you know how much you\u2019re up for.<\/p>\n

However, different lenders use different LMI insurers. So the premium can vary depending on the lender you choose.<\/p>\n

That\u2019s why it\u2019s important to talk to us.<\/p>\n

We can explain what the LMI premium is likely to be for each lender you\u2019re considering. This could see you potentially save on LMI.<\/p>\n

2. Pay LMI off gradually<\/h3>\n

Instead of paying LMI in a lump sum, your lender may agree to add the cost to your loan balance.<\/p>\n

This way you can pay LMI off gradually as part of your normal home loan repayments, but the downside is you\u2019ll likely be paying interest on that LMI amount over the life of your home loan.<\/p>\n

Remember that example we used earlier of a $500,000 apartment with a $50,000 deposit?<\/p>\n

Adding the LMI premium to your home loan in that scenario could result in your monthly repayments increasing by about $45-65 per month over the life of a 30-year home loan, depending on the interest rate at the time.<\/p>\n

Alternatively, some LMI insurers can allow you to pay your\u00a0LMI premium in monthly instalments<\/a>\u00a0until you\u2019ve got a suitable amount of equity built up in the property that your lender is satisfied with.<\/p>\n

3. Have LMI waived altogether<\/h3>\n

Like the sound of sidestepping LMI completely?<\/p>\n

Here are a few strategies that could scratch the cost of LMI from your buying budget:<\/p>\n

\u2013 Use your job:<\/strong>\u00a0some lenders\u00a0waive LMI for workers in certain professions<\/a>\u00a0such as doctors, lawyers, accountants, vets, engineers and pharmacists.<\/p>\n

\u2013 Tap into the Home Guarantee Scheme:<\/strong>\u00a0this scheme sees the Australian government guarantee your loan, allowing\u00a0first home buyers<\/a>\u00a0to buy with just a 5% deposit, or as little as 2% if you are a\u00a0single parent<\/a>\u00a0\u2013 and no LMI to pay.<\/p>\n

\u2013 Ask a family member to guarantee your loan:<\/strong>\u00a0a guarantor can provide additional security, such as the equity in their own home, to raise the security on your loan up to the equivalent of a 20% deposit.<\/p>\n

Next step? Contact us<\/h3>\n

If you\u2019re having trouble saving up for a 20% deposit, contact us today.<\/p>\n

We can help give you a clearer idea of what you could be up for in LMI, and help you discover any steps you may be able to take to keep a lid on the cost.<\/p>\n

Disclaimer:<\/strong>\u00a0The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute tax or financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.<\/p>\n","protected":false},"excerpt":{"rendered":"

Saving for a 20% house deposit is like house training a wilful Labrador. It requires plenty of patience and persistence. Not your thing? You could take out lenders mortgage insurance (LMI). But how much extra does that cost? And can you avoid paying for it? (for the LMI, not the dog\u2026) LMI is a type […]<\/p>\n","protected":false},"author":23,"featured_media":5504,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"nf_dc_page":"","_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"_genesis_hide_title":false,"_genesis_hide_breadcrumbs":false,"_genesis_hide_singular_image":false,"_genesis_hide_footer_widgets":false,"_genesis_custom_body_class":"","_genesis_custom_post_class":"","_genesis_layout":"","_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[110],"tags":[],"class_list":{"0":"post-5503","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-home-loans","8":"entry"},"yoast_head":"\nHow much does LMI really add to a home\u2019s cost? · FinancialPlus Mortgage Broker Gold Coast<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/financialplus.com.au\/how-much-does-lmi-really-add-to-a-homes-cost\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"How much does LMI really add to a home\u2019s cost? · FinancialPlus Mortgage Broker Gold Coast\" \/>\n<meta property=\"og:description\" content=\"Saving for a 20% house deposit is like house training a wilful Labrador. 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