Lenders Mortgage Insurance (LMI) and Loan Protection Insurance (LPI) are two totally different things.
Full glossary is available here
LMI is something your lender will generally require you to pay if you take out a mortgage with less than a 20% deposit.
LPI is something you can optionally purchase to protect you in case you can’t afford to make your loan repayments for a period of time down the track.
LMI does nothing to protect you as the borrower. It only protects the lender, because your loan is seen as higher risk if you’re borrowing more than 80% of a property’s value.
The benefit to you, though, is that LMI allows you to buy a home sooner, without having to save up that whopping 20% for a deposit.
- It varies quite a lot, and can range anywhere from around 1% to 5% of the loan amount, depending on these factors:
- Property price
- Deposit amount
- Loan to value ratio (LVR)
- State laws and incentives
- Whether you’re self-employed
- Whether the property is for investment purposes
