What is Lenders Mortgage Insurance, and how can it get you to your dream home quicker?
You’ve made up your mind. You’re going to dive into the housing market and build a home with Eden Brae. Congrats! You’ve made a massive leap towards stability, financial independence, and a family home for years to come.
However, the prospect of having to save 20% of your home loan for a deposit can be off-putting when you’re trying to juggle savings with everyday life. Fortunately, Lenders Mortgage Insurance (LMI) allows you to start your build ASAP, even with a small deposit.
What is Lenders Mortgage Insurance?
Lenders Mortgage Insurance is a premium added to your home loan. LMI provides your lender with a ‘shortfall’ if you default on your loan and the gains from selling your house or site are less than your outstanding debt.
It’s important to remember that LMI is different to Mortgage Protection Insurance (MPI). MPI protects the borrower (you) and your finances in the event of misfortune like unemployment or illness. LMI protects the lender, even though you’re paying the insurance premium.
Whilst LMI is usually a one-off payment; it can be added to your loan amount to be paid off alongside your mortgage payments.
What are the benefits?
LMI gives your lender confidence they can provide you with a mortgage for your build. As a result, you get to enter the property market when you feel the conditions are best, regardless of your deposit size. What’s more, you won’t have to find a guarantor, and you can start growing your property’s equity.
Should I get LMI, or should I save instead?
Everyone’s financial circumstances are different, and you might find you’re comfortable with saving for an extra year or two before getting a mortgage. However, if you’re concerned with rising house prices or future hiccups that might have you breaking the piggy bank, an LMI allows you to get started building your dream home with Eden Brae right away.
If you’ve got any more questions about LMI and how it relates to your home build, contact your financial advisor for more information.