How is Lenders Mortgage Insurance Calculated?

If you have to pay LMI on your property loan, the premium may be capitalised into your loan amount, provided the total sum borrowed does not exceed the maximum lending margin.


The total amount payable to the lenders mortgage insurer is a combination of the charge and government stamp duty.

The charge is calculated as a percentage of the loan amount and the government stamp duty is calculated as a percentage of the charge.

The premium rates are identical for all States.

Only the stamp duty varies from State to State.

The minimum charge applicable to LMI is usually around $500.

When calculating LMI, the loan value ratio is taken into consideration.

If fees were required to be borrowed, this would need to be added to the total loan required, which therefore increases the LVR as the loan amount increases.

Each lender has a different maximum LVR but occasionally lenders will have a product which allows capitalisation of the cost of the mortgage insurance to the loan amount and occasionally, there are lenders that require LMI is paid up front.

Each LMI insurer has their own pricing structures and each lenders rates differ and there may be different rates for Interest Only loans.

Where a borrower has not defaulted on their loan, most mortgage insurers will refund 40 to 50% of the mortgage insurance premium to borrowers who refinance within the first 12 months.

It is a lenders responsibility to advise the mortgage insurer of the repayment of any insured loan and initiate a request for a refund, so borrowers need to ask their lender directly, to organize this.


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Contact us @ propertyloans@realrenta.com


Jason Gwerder
Wednesday, 4 March 2020

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