Aspiring property buyers continue to be confused by Lenders Mortgage Insurance and are often failing to account for it in their overall costing, according to one mortgage broking group.
While interest rates will always be an issue for borrowers, it is unanticipated extra expenses such as LMI that often cause potential borrowers to adjust their plans, Loan Market corporate spokesperson Paul Smith said.
Mr Smith said borrowers with minimal deposits could pay several thousands of dollars in LMI charges, which need to be accounted for.
“Generally anyone looking at borrowing more than 80 per cent of the purchase price is required to pay LMI,” he said.
Mr Smith said first timer buyers were particularly susceptible to paying higher LMI, as they tend to start with a smaller initial deposit to get into the market.
“Saving for a deposit on your first home is one of the most difficult things facing buyers in today’s market, especially considering high rental costs and living expenses,” he said.
“On a $300,000 mortgage a prospective purchaser borrowing 90 per cent of the property value will be required to pay around $3,500 in mortgage insurance.
While it’s obvious to consumers to shop around for competitive interest rates, many people don’t realise the importance in considering LMI charges, Mr Smith said.
“Mortgage insurance costs do vary between banks and lenders and this needs to be factored in against standard considerations such as interest rates and lender fees.”