Lenders Mortgage Insurance also known as LMI is one way of getting into homeownership without having the 20% deposit which is typically required by most banks and financial institutions.
With Lenders Mortgage Insurance, lenders may allow you to borrow a higher proportion of the purchase price, allowing you to purchase a property with a smaller deposit than would otherwise be required. It may also enable you to borrow at an interest rate that is comparable to a borrower who has a larger deposit.
Lenders Mortgage Insurance should not be mistaken for Mortgage Protection Insurance, which covers your mortgage in the event of death, sickness, unemployment or disability. Lenders Mortgage Insurance protects your lender against a loss should you, as a borrower, default on your home loan. If the security property is required to be sold as a result of the default, the net proceeds of the sale may not always cover the full balance outstanding on the loan. Should this be the case, your lender is entitled to make an insurance claim to Genworth for the reimbursement of any shortfall. Where a claim for loss is paid to a lender, Genworth may seek recovery from the borrower, or any guarantor, for any shortfall amount.
Watch this short animation to find out more.