There are ways to avoid lenders mortgage Insurance if you don’t have 20% deposit
Lender's Mortgage Insurance (LMI) is a one-off payment by the borrower when a loan exceeds 80 per cent of the property's value. It covers the lender's risk if the borrower defaults, but does not cover any loss by the borrower.
LMI can be a painful hit to the hip pocket, often running to several thousands of dollars, especially after a home buyer has scraped together the minimum deposit.
One alternative to paying LMI if you have less than a 20 per cent deposit is to secure a guarantor to cover the extra stretch.
A guarantor is usually a family member who is willing to put forward their property as security. One of the common myths that can scare family off is that the guarantor is then responsible for the entire loan. Not true. They only need to guarantee any amount beyond the 80 per cent loan-to-value ratio (LVR). Although it's a good idea for a guarantor to seek both financial and legal advice before committing.
The advantage of securing additional funding through a guarantor is that it simply gets tacked onto your loan so you can repay it over time, rather than forking out up front for LMI.
The key before you make any big decisions about home finance is to have all the facts at your fingertips. Your broker at AKL Finance Group will be able to compare the products and options that are out there and size up which arrangement will work for you and your circumstances.
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