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What is Lenders Mortgage Insurance?

What is Lenders Mortgage Insurance?

Lenders Mortgage Insurance (LMI) is a mortgage policy that will protect the lender in the event that the borrower defaults on their home loan.

If a borrower defaults on their home loan, and the property is repossessed by the lender, the lender may lodge a claim under LMI if the value of the house is not sufficient to cover the outstanding loan amount. This instance would arise if the value of the property had declined below the loan amount.

Australian banks have made LMI compulsory for all borrowers who are not providing a twenty (20) percent deposit on their home loan. If a borrower takes out LMI the bank is then able to lend a larger amount or approve a home loan without the borrower providing a twenty (20) percent deposit.

LMI is a separate product to mortgage protection insurance which can be used to protect borrowers if they are unable to make payments on their home loan due to unanticipated circumstances such as unemployment, injury, illness or death.

If you are considering purchasing a property and will require LMI please ensure you understand the terms and conditions of this policy. Your bank and financial advisor will be able to advise you as to whether or not you should take out LMI.

If you would like to understand the legal implications of LMI do not hesitate to contact Rapid Legal Solutions on 4755 9150 to arrange an appointment. 

Article posted 2 November 2016

This document offers general information only and should not be relied upon as legal advice under any circumstance.  Please contact your solicitor for clarification on any areas.


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