Why LMI Can Be A Smart Move

​For many aspiring homeowners, saving for a 20% deposit can feel like an uphill battle—especially with rising property prices.

While Lenders Mortgage Insurance (LMI) is often seen as an added cost, it can actually be a valuable tool that allows you to enter the market sooner rather than waiting years to save a larger deposit. Here’s why LMI can sometimes be a necessity rather than a burden.

1. Faster Entry into the Property Market
Saving a 20% deposit can take years, particularly in high-growth areas where property prices increase faster than savings can keep up. By paying LMI, borrowers can secure a home loan with as little as a 5-10% deposit, allowing them to enter the market earlier and start building equity sooner.

2. Capitalising on Market Growth
Real estate markets fluctuate, and in strong growth periods, waiting to save a larger deposit can mean paying more for the same property down the track. By using LMI to secure a home sooner, buyers can benefit from potential capital growth rather than being priced out of the market later.

3. Avoiding Years of Paying Rent
Renting while saving for a larger deposit can be costly. The money spent on rent could be redirected toward home loan repayments, helping you invest in your own property rather than paying off someone else’s mortgage.

4. Taking Advantage of Government Schemes
First-home buyer incentives, such as the First Home Owner Grant or stamp duty concessions, often have eligibility criteria based on purchase price or timing. LMI can help buyers take advantage of these benefits before they expire or property prices exceed the threshold for eligibility.

5. Potential for Refinancing or LMI Waivers in the Future
Some lenders offer LMI waivers for specific professions, or borrowers may be able to refinance once their Loan-to-Value Ratio (LVR) improves. While LMI is an upfront cost, it doesn’t necessarily mean you’ll be locked into it long-term.

Weighing Up the Costs vs. Benefits
While LMI adds to the cost of a loan, it’s important to compare this against the potential financial benefits of entering the market earlier. Kerry from KLM finance can help assess your individual situation and determine whether paying LMI could be a strategic move for you.

If you’re considering your options and want to explore whether LMI could work in your favour, get in touch with KLM finance today for a personalised assessment.