There is a new weapon in the battle to attract customers in a competitive home loan market: covering the cost of Lenders’ Mortgage Insurance (LMI).
LMI is payable on mortgages with a loan-to-valuation ratio (LVR) above 80% and can cost borrowers $11,000 on a $700,000 loan with an LVR of 87.5%.
This cost does nothing for the borrower. The borrower pays the premium but the insurance protects only the lender – and is another impediment to affordability, so it’s welcome news that with some lenders are waiving LMI.
Lender 86 400 was the first to offer a discount deal in August, Bank of Queensland followed suit in September and Homestar has done so this month, says comparison website Mozo. 86 400 offers loans up to an 85% LVR with no LMI. Bank of Queensland does similar, although the loan carries a 0.3% interest rate loading. The Homestar Finance option is its new Star Choice LMI waiver offer available for loans up to 90% LVR.