Lenders' mortgage insurance
We know lenders’ mortgage insurance is a complicated financial product that is not always well understood by the community. We are committed to helping increase transparency in the industry about this product and working with our Financial Institution partners to ensure it is well communicated to prospective borrowers.
What is lenders’ mortgage insurance?
Lenders’ mortgage insurance is insurance that protects a lender from loss on a mortgage.
It provides greater access to home ownership for borrowers who have the capacity to repay a loan but don’t have the minimum deposit required by their lender, which is often 20% of the value of the property.
Who does it protect?
Lenders’ mortgage insurance protects the lender from loss on a mortgage. It is not insurance to protect the borrower. Borrowers have access to a range of other products to protect themselves and can discuss these products with their financial institution.
How does it work?
If a lender takes possession of a borrower’s property and sells it, or if the borrower sells it themselves, and there’s an outstanding loan balance, the lenders’ mortgage insurer will pay the lender under the LMI policy. The borrower remains responsible for repaying the lenders’ mortgage insurer what was paid to the lender.
How do we recover?
Losing a property is difficult and we carefully consider each borrower’s circumstances on a case by case basis. For example, we typically don’t pursue recovery if there has been a death, the borrower is bankrupt or reliant on an aged pension.
Our recovery action involves determining whether a borrower has sufficient income or assets to pay the debt or to enter a reasonable repayment arrangement. Recovery action will typically cease if the borrower provides a statement of financial position and supporting documents which confirms they don’t have capacity to pay. We always consider any reasonable repayment arrangement and settlement offer.
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