Lenders Mortgage Insurance
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Home Loan Products
LMI protects the Bank against loss should a borrower
default on their loan. If the security property is required to be sold as a
result of default, the funds received from the sales may not cover the full
balance outstanding on the loan. In this scenario, the Bank is entitled to make
an insurance claim to the LMI provider for the amount outstanding, subject
to the terms and conditions of the LMI Master Policy. The borrower
remains liable for any amounts owing under the contract even if the mortgage
insurer has paid that amount to the Bank. LMI should not be confused with
Mortgage Protection and Loan Protection Insurance, which covers the borrower in
the event of sickness, unemployment, disability, or death.
What are the benefits of LMI?
For the lender
LMI minimises the risk of loss on low deposit housing loans. It
gives the Bank the confidence to approve more mortgages and enhances our
ability to lend to a broader range of customers. This helps the Bank remain
competitive in the home loan market.
For the borrower
Essentially this gives people, with less deposit, the
opportunity to enter into the property market. LMI also allows property
investors to have higher lending ratios, giving them the opportunity to
leverage off the associated benefits of negative gearing.