Lender Mortgage Insurance (LMI)
When buying your first home, patience is one virtue that you should hold close. You have to be patient enough to make the right decision especially if you are relying on a home loan. If this virtue lacks in your personality, you may end up paying Lender Mortgage Insurance (LMI). Many homeowners don’t understand what LMI is and end up making wrong choices while seeking mortgage. Lender mortgage insurance (LMI) is an insurance policy that protects the financial institution or lender from financial loss when you (the borrower) cannot repay your home loan.
Lender mortgage insurance generally protects the lender and applies to home loans that seem too risky to agree to or trust. The level of risk involved is directly compared to the home Loan to-Value Ratio. However, it can also be determined by the financial capability of the candidate. With LMI policy, lenders will not lose out their finances due to a deficit and so they will be able to lend more home funds. You should not confuse lender mortgage insurance with regular mortgage insurance available for borrowers protecting themselves against loss of job or sickness. Also, you should also know how LMI works before you make any home investment move.