While investors mainly attempt to avoid Lenders Mortgage Insurance (LMI), it may actually be worthwhile reconsidering, according to one mortgage advisory group.
LMI may be looked on as an unnecessary evil, but it isn’t that ‘black and white’ according to Smartline Personal Mortgage Advisers, who urge that getting into the market quicker can potentially make the extra cost worthwhile.
In fact, the one-off fee could be looked at as one way to get into the property market quicker if a deposit is smaller than necessary.
“While it’s generally preferable to have a 20 per cent deposit for the purchase of a property, it’s not always possible to do so, particularly for first home buyers,” Smartline adviser Graeme Inglis said of the fact that LMI is required to insure lending of more than 80 per cent.
“It may be that LMI provides people with the ability to capitalise on some of the good buying opportunities that are currently available and get their first foot on the property ladder, rather than having to spend several more years renting and trying to save,” Mr Inglis said.
If paying LMI, investors should ensure that the property they are buying is worth the extra money being spent and that capital growth will be of greater benefit in the long run.
“If you’re unsure whether to buy now or perhaps wait longer to save more of a deposit, an experienced mortgage adviser will be able to run the calculations for you and give you some advice based on your individual situation,” he said.
In some circumstances, saving for more of a deposit to avoid paying LMI may be the better strategy in the long run.
“Talk with your mortgage adviser as a priority so they can advise you on the best course of action.”