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With the support of Lenders Mortgage Insurance (LMI), IMB Bank (IMB) may be able to accept a smaller deposit and provide a home loan to you that might not otherwise be available.
LMI is an insurance policy that IMB takes out to protect itself against the risk that you default on your loan repayments and IMB is unable to recover the full outstanding loan amount.
LMI protects IMB as the lender, not you, the borrower
It is important to note that Lenders Mortgage Insurance covers IMB and does not protect you or any guarantor.
How does LMI help you, the borrower?
LMI enables you to obtain a home loan that might not otherwise be available, by reducing the deposit you are required to provide. This means you will be able to:
- buy a home sooner and stop paying rent; or
- buy a more expensive property with the deposit that you have.
The cost of LMI is a one‑off cost
LMI is arranged by IMB and the premium is a one-off cost IMB pays to the Mortgage Insurer upon settlement of your property purchase. This cost is passed on to you by IMB, as a fee.
IMB will tell you how much it will cost after you apply for your loan. The cost will depend on various factors including the size of your deposit and the type of loan you take out. If you don’t wish to pay the insurance premium up front, IMB can add the cost of this fee to your loan amount, which means you will pay interest on it over the term of your loan.
Refunds
The LMI fee is generally not refundable. However, in some limited situations you may be entitled to a partial refund of the LMI fee.
This means that if you were to refinance your home loan with another lender or increase your loan amount, you may be required to pay a LMI fee again.
Check with IMB to find out about the refund policy and if it applies to you.
Difficulty making your repayments?
If you are experiencing financial difficulties and are concerned about your ability to make your loan repayments on time, it is important that you let IMB know as soon as possible, as we may be able to help. Call us on 133 462 if you need to talk to us.
What happens if you default and your property is sold?
If you default on your loan, your property might be sold. If the money received from the sale of your property is not enough to repay your outstanding loan, IMB can make a LMI claim and the insurer will pay IMB the shortfall. Once a claim has been paid, you continue to be responsible for the outstanding shortfall debt. Typically, this debt is passed on to the insurer by IMB and the insurer may seek to recover the outstanding shortfall debt directly from you and any guarantors.
Where can I find out more information about LMI?
You can contact your lender or visit the financial information website of the Australian Securities and Investments Commission at www.moneysmart.gov.au.
Frequently Asked Questions (FAQs) about LMI can also be found at www.understandinsurance.com.au/types-ofinsurance/ lenders-mortgage-insurance.
