Lender’s Mortgage Insurance or Risk Fee
Depending on your lender’s requirements, Lenders Mortgage Insurance allows client to borrow up to 95% of the purchase price, with a lower deposit than is usually required.
Traditionally, lenders require borrowers to have at least a 20% deposit. However by using Lenders Mortgage Insurance, lenders are able to offer lower deposit home loans. Lenders Mortgage Insurance protects the lender if a borrower is unable to meet their mortgage repayments and the property has to be sold.
If the proceeds from the sale of the property are insufficient to cover the outstanding loan balance and other costs incurred by lender in relation to enforcing the mortgage, the lender is able to claim any shortfall from the insurer calculated in accordance with the terms of the insurance policy.
Note: Lenders Mortgage Insurance should not be mistaken for Mortgage Protection Insurance, which covers mortgage repayments in the event of death, sickness, unemployment or disability.
FAQs for clients:
How does Lenders Mortgage Insurance benefit me?
Even with a small deposit you can be in your home sooner. Lenders Mortgage Insurance is also available for residential mortgage loans for investment property.
Who is insured?
It is actually your lender, not you or your guarantor that is covered by Lenders Mortgage Insurance.
How do I obtain Lenders Mortgage Insurance?
Your lender will advise you if your loan requires Lenders Mortgage Insurance and will prepare all the necessary documentation.
To qualify for Lenders Mortgage Insurance your lender will check that you are able to meet regular mortgage repayments, and meet relevant policy. Your lender is your sole point of contact if you have any questions regarding the Lenders Mortgage Insurance cover provided in respect of your loan.
What costs are involved?
Unlike traditional insurance products, Lenders Mortgage Insurance is a once only premium, payable at loan settlement, which provides the lender with cover for the full term of the loan.
Your lender will calculate the premium by taking into consideration the size of your deposit and the type of loan product you choose. To reduce upfront costs, it may be possible to add the Lenders Mortgage Insurance premium onto the total loan amount. Please ask your lender.
Are GST and stamp duty payable?
Yes. GST is payable on all Lenders Mortgage Insurance premiums, and stamp duty may be payable subject to State Government regulations. These amounts will be included in the total premium quoted by your lender.
Is the premium refundable if the loan is repaid early?
It depends on the circumstances – your lender can advise whether a partial refund of the insurance premium is applicable in your case. A partial refund is available in the first one to two years depending on your lender and the Lenders Mortgage Insurance provider.
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