Information on Mortgage Insurance for Australian Borrowers

Mortgage Insurance

If you need to borrow more than 80% of the valuation of a property then most lenders will require you to take out mortgage insurance. The valuation is determined by the lender and may be less than the purchase price, meaning you have to provide extra funds at settlement!

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This protects the lender in case you default on your loan or the house is sold for less than the amount owing on the mortgage. If you default on your loan the lender is reimbursed by the insurer who will then come after you. It does not protect you the borrower. You need to take out separate mortgage protection insurance to cover your repayments if you become sick or unemployed.

The mortgage insurance premium is usually between 0.35% and 2.0% of the amount you borrow depending on the perceived risk indicated by the loan to valuation ratio (LVR). It is a one off cost and you may be entitled to a partial refund if you repay your loan early.

The premium is often added to the amount borrowed but some lenders may require an up-front payment. Because it is such a big cost it is in your best interest to save a large deposit and get below the 80% threshold.

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Thank you for visiting our web-page on Mortgage Insurance in Australia. We hope the information has proven useful.