Cairns Mortgage Broker – Preston Finance – Home Loans Cairns

How Expensive Is Lenders Mortgage Insurance?

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Each lender has different premiums being charged for the same Lenders Mortgage Insurer. In fact there are only 2 providers in the market being Genworth and QBE. With the variation in premiums you should consider the LMI premium in addition to the interest rate being charged by a lender as sometimes the saving in interest cost of 0.05% is actually outweighed by the premium charged.

The premium charged can range from 3.0%-4.5% of the loan amount and the higher the LVR, the higher the premium. In some cases, premiums also increase if you are self employed and/or first home buyers.

If you want to know how much you need to save in order to qualify for a loan: The general rule of thumb if you are looking for a loan with the maximum amount you can borrow (usually up to 95% including lenders mortgage insurance) and you are capitalising the premium into the loan: You should work on the basis that the actual loan amount 92% of the purchase price.

So you would need to have saved 8% of the purchase price in order to secured your loan. The 8% includes the lender setup costs, legal fees and government fees which are all on top of your cash contribution; in this case the cash contribution to the purchase price would be 5%.

Talk to your broker today to get an accurate assessment of how much funds you need to save in order to qualify for your home loan.

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