Mortgage-heaven.com blog

Lender’s mortgage insurance. Do you need it?

Those who are taking out their first home loan and they haven’t saved very much money, will most probably have to pay for lender’s mortgage insurance - the amount paid is related directly to the size of one’s deposit. Normally, if you save a deposit of 20% or more, there’s no need to pay LMI at all. On the other hand, if you pay a very low deposit, for example only 5%, the amount of insurance you pay will be very high. Before approving you for lender’s mortgage insurance, the insurance company requires a proof that you are able to service the loan, and it will take several factors into account before approving you. The most important factor considered is your savings history. To get an approval, you typically need to have saved 3% to 5% of the total mortgage cost - if you got the money from your parents or acquired it through some other source, and you have no solid savings history, you may not qualify for LMI and your home loan application will be rejected.