The process of buying a new home is often associated with unexpected fees and buying costs you may not be prepared for. One such fee involves the purchase of lenders mortgage insurance.
Whether or not you are required to buy it is most often determined by the percentage of the property value you are borrowing.
If it is more than 80 per cent, you are usually required to purchase insurance.
What is the purpose of lenders mortgage insurance?
Lenders mortgage insurance protects your lender if you fail to pay your home loan and the property has to be sold.
It is important to note that the money raised does not cover the loan.
What is the cost?
Lenders mortgage insurance is a one-off fee that is calculated on a sliding scale. Depending on the loan amount and ratio, it can be expensive.
This rate often differs with the amount you are borrowing, as well as the lender you are working with and the type of financial product you have chosen.
Who do I ask about lenders mortgage insurance?
A mortgage adviser is the best person to speak to about mortgage insurance. With comprehensive knowledge of different lender requirements and borrowing criteria, they are well-placed to give you relevant and up-to-date information.
There is also the possibility that securing two loans instead of one may reduce the rate of lenders mortgage insurance that you pay.
Mortgage brokers would be able to provide the specifics on all of these different types of scenarios and offer targeted advice for your personal situation.
The value of a large deposit
If you would like to avoid buying lenders mortgage insurance all together, you may want to seek advice about budgeting towards a healthy deposit.
The more you have to put towards a down payment on your property, the more options you have in terms of securing a favourable lending agreement.
DISCLAIMER: The information contained in this article is correct at the time of publishing and is subject to change. It is intended to be of a general nature only. It has been prepared without taking into account any person’s objectives, financial situation or needs. Before acting on this information, Smartline recommends that you consider whether it is appropriate for your circumstances. Smartline recommends that you seek independent legal, financial, and taxation advice before acting on any information in this article.