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Lenders' Mortgage Insurance (LMI)

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LMI is a one-off insurance premium payable by the borrower designed to protect the Bank against the potential loss we may incur if the borrower is unable to repay their loan. If the security property is required to be sold before the loan is repaid, LMI can cover the Bank for a shortfall where the sale price of the property does not cover the outstanding loan balance plus claimable costs. The borrower still remains liable for the shortfall even after the mortgage insurer has paid that amount to the Bank. LMI should not be mistaken for separate insurances, such as loan protection insurance which could help pay your loan repayments if you’re unable to work or your loan balance if you pass away. The LMI premium is not a Bank fee or an establishment fee. It is collected on the borrower’s behalf and passed to our mortgage insurance provider.

A customer-friendly Lenders’ Mortgage Insurance and Low Deposit Premium fact sheet is now available to help you explain LMI and to provide to the customer.

 

The LMI and LDP premium is non refundable.

 

When is it required?

Lenders' Mortgage Insurance is required where there is an increased risk associated with a home loan. The circumstances of the loan will determine whether LMI may apply.

 

What are the benefits of LMI?

For the lender

LMI minimises the potential risk associated with a home loan. 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 a higher risk loan, the opportunity to enter into the property market (e.g. with a small deposit). LMI also allows property investors to have higher lending ratios, giving them the opportunity to leverage off the associated benefits of negative gearing.

LMI cover

 

What is covered by LMI?

LMI covers:
  • Loss of principal,
  • Unpaid interest,
  • All reasonable recovery costs such as legal fees, marketing costs, repairs, maintenance, and outstanding rates.

 

What is not covered by LMI?

LMI does not cover:
  • The borrower or guarantor,
  • Break costs on fixed rate loans,
  • Physical damage to the security (normally covered under a general insurance policy),
  • Fees and charges not directly related to costs incurred by the lender in recovery of the debt.

 

Current Mortgage Insurer

The Bank's current preferred mortgage insurance provider is Genworth Australia.

 

LMI Premium

The LMI premium payable is typically based on the size of the deposit, and the value of the property. The circumstances of the loan will also determine whether LMI may apply.

Refer to Security Lending Margins for LVR limits and use the Postcode Lookup Tool to determine specific LMI Policy. The LMI premium is added to the total loan and included in the loan repayments.

A 15% premium loading applies to applications where the value of the investment property security represents >50% of the total property security value. The loading is added to the LMI calculation.

A 10% premium loading applies to applications where any party to the loan (borrower or guarantor) has primary employment of self-employed. The loading is added to the LMI calculation.

Geographic premium loadings apply depending on the circumstances of the loan. Refer to the Postcode Lookup Tool to determine if a geographic loading applies. The loading is added is added to the LMI calculation.

A 5% premium loading applies to applications where it involves certain loan purposes. The loading is added to the LMI calculation.

The loading:

  • applies when the new application does not involve an existing CBA LMI insured loan, and:
    • the application loan purpose is 'Re-finance of existing home loans - Refinancing of housing loans of other financial institutions', or
    • the application does not include a loan purpose listed in the 'Loan purposes exempt from 5% loading' table below.
  • does not apply when:
    • the new application involves an existing CBA LMI insured loan, or
    • the application loan purpose is not 'Re-finance of existing home loans - Refinancing of housing loans of other financial institutions' and the application includes a loan purpose listed in the 'Loan purposes exempt from 5% loading' table below. 

 

Loan purposes listed below are exempt from 5% loading
Construction of a dwelling – House
Construction of a dwelling – Other
Purchase of a newly erected dwelling – House
Purchase of a newly erected dwelling – Other
Purchase of an established dwelling – House
Purchase of an established dwelling – Other
Alterations and additions to a dwelling – NOT Owner Occupied
Alterations and additions to a dwelling – Owner Occupied
Re-finance of existing CBA/Colonial debt (for Housing/Investment Housing purposes)
Purchases of land – dwelling will be built in less than 12 months
Purchases of land – Other

 

LMI LDP Quotation Tool Hints and Tips

LMI Premium Tables

LMI Calculations: Net-Off Calculation Method for Top Up/Additional Advances on existing loans

LDP Calculations: Net-Off Calculation Method for Top Up/Additional Advances on existing loans

Security Lending Margins

Postcode Lookup Tool