The Lenders Mortgage Insurance trap hurting Aussie budgets
Thousands of Australians refinance their home loan each year^ on the hunt for a lower home loan rate, and in result, more money in their back pockets.
But with Lenders Mortgage Insurance (LMI) weighing on the minds of wishful refinancers that haven’t built up enough equity in their home to qualify for an LVR of 80% or lower, Mozo Property Expert Steve Jovcevski has called for an end to “double dipping” on mortgage insurance.
“With billions of dollars in loans attracting mortgage insurance, borrowers who haven’t built up 20% equity are staring at the financially painful prospect of paying LMI twice,” he said.
“It’s time for lenders to act to protect their most vulnerable borrowers. Giving people the ability to transfer their insurance to a lender with a more competitive interest rate will significantly improve their chances of building equity in their home.”
RELATED: First home buyers optimistic about buying a property, says Westpac
Jovcevski also noted that if you have less than 20% equity on your home and have already paid LMI once, “the news of falling property prices is your worst nightmare.”
“Getting to 20% equity is the goal of all first home owners, but declining prices put paid to any opportunity they have of refinancing at a cheaper interest rate without being slugged by LMI a second time.”
Lenders Mortgage insurance, which is a one-off payment that protects lenders in the event you default on your mortgage, was charged on 1 in 5 loans in the last financial year. It's a cost that can stack up to six or more months of mortgage repayments, and Jovcevski has long been a proponent of making LMI portable, or for refunds to be more readily given
“It’s time lenders allowed this insurance to be transferred across loans without penalty,” he said.
“Making this simple change to lenders mortgage insurance will go a long way to ease the cost of living and significantly reduce the risk of defaults.”
If you’ve weighed up the pros and cons and decided that refinancing is right for you, your next step is looking around for the low rate home loan of your dreams.
Check out some great offers below, or head to our home loan comparison tool for a wider selection.
Variable rate home loans - last updated 27 April 2024
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Featured Product
Mozo experts choice awards won:
- Low Cost Home Loan - 2024
Unloan Variable
Owner Occupier, LVR <80%
variable rate
comparison rate
Initial monthly repayment5.99% p.a.5.90% p.a.Built by CommBank, the Unloan is the first home loan with an increasing discount (conditions apply) for borrowers. No application or banking fees. No monthly account keeping or early exit fees. Apply online in minutes.
CompareCompareUnloan Variable
Built by CommBank, the Unloan is the first home loan with an increasing discount (conditions apply) for borrowers. No application or banking fees. No monthly account keeping or early exit fees. Apply online in minutes.
- variable rate
- 5.99% p.a.
- comparison rate
- 5.90% p.a.
- variable rate
- 5.99% p.a.
- comparison rate
- 5.90% p.a.
- Upfront fees
- $0
- Ongoing fees
- $0.00
- Discharge Fee
- $0.00
- Extra repayments
- yes - free
- Redraw facility
- yes - free
- Offset account
- no
- Maximum loan to value ratio
- 80.00%
- minimum borrowing amount
- $10,000
- maximum borrowing amount
- $10,000,000
- type of mortgage
- Variable
- Repayment types
- Principal & Interest
- Availability
- Owner Occupier
- Repayment options
- Weekly, Fortnightly, Monthly
- Special Offers
- -
Read our Mozo Review to learn more about the Unloan Unloan Variable
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Mozo experts choice awards won:
- Exceptional Value Home Lender - 2024
Express Home Loan
Owner Occupier, Principal & Interest, LVR <90%
variable rate
comparison rate
Initial monthly repayment6.01% p.a.6.14% p.a.Get fast online approval from the award-winning Bendigo Bank Express Home Loan. Multiple offset accounts and redraw available. 100% offset on variable rate loans and partial offset on fixed rate. Flexible repayment options. New home loans only.
CompareCompareExpress Home Loan
Get fast online approval from the award-winning Bendigo Bank Express Home Loan. Multiple offset accounts and redraw available. 100% offset on variable rate loans and partial offset on fixed rate. Flexible repayment options. New home loans only.
- variable rate
- 6.01% p.a.
- comparison rate
- 6.14% p.a.
- variable rate
- 6.01% p.a.
- comparison rate
- 6.14% p.a.
- Upfront fees
- $134
- Ongoing fees
- $10.00 monthly
- Discharge Fee
- $350.00
- Extra repayments
- yes - free
- Redraw facility
- yes - free
- Offset account
- yes
- Maximum loan to value ratio
- 90.00%
- minimum borrowing amount
- $5,000
- maximum borrowing amount
- $3,000,000
- type of mortgage
- Variable
- Repayment types
- Principal & Interest
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- Owner Occupier
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- Weekly, Fortnightly, Monthly
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- -
Read our Mozo Review to learn more about the Bendigo Bank Express Home Loan
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Elevate
Owner Occupier, Principal & Interest, <80% LVR
variable rate
comparison rate
Initial monthly repayment6.09% p.a.6.20% p.a.Get competitive rates on loan terms of 5 to 30 years with the Aussie Elevate Home Loan. Structure your loan with up to five splits. Make additional repayments (T&Cs apply). Offset accounts available. Unlimited redraw using your online banking account. Choose from weekly, fortnightly or monthly payments For loan amounts from $10,000 to $5 million.
CompareCompareElevate
Get competitive rates on loan terms of 5 to 30 years with the Aussie Elevate Home Loan. Structure your loan with up to five splits. Make additional repayments (T&Cs apply). Offset accounts available. Unlimited redraw using your online banking account. Choose from weekly, fortnightly or monthly payments For loan amounts from $10,000 to $5 million.
- variable rate
- 6.09% p.a.
- comparison rate
- 6.20% p.a.
- variable rate
- 6.09% p.a.
- comparison rate
- 6.20% p.a.
- Upfront fees
- $498
- Ongoing fees
- $0.00
- Discharge Fee
- $325.00
- Extra repayments
- yes - free
- Redraw facility
- yes - free
- Offset account
- Optional extra - $10 per month
- Maximum loan to value ratio
- 80.00%
- minimum borrowing amount
- $10,000
- maximum borrowing amount
- $5,000,000
- type of mortgage
- Variable
- Repayment types
- Principal & Interest
- Availability
- Owner Occupier
- Repayment options
- Weekly, Fortnightly, Monthly
- Special Offers
- -
Read our Mozo Review to learn more about the Aussie Elevate
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Mortgage Simplifier
LVR<80%, Owner Occupier, Principal & Interest
variable rate
comparison rate
Initial monthly repayment6.14% p.a.6.17% p.a.Get a competitive variable rate with ING’s Mortgage Simplifier. Free extra repayments, no monthly or annual fees. Freedom to make free extra repayments or redraws.
CompareCompareMortgage Simplifier
Get a competitive variable rate with ING’s Mortgage Simplifier. Free extra repayments, no monthly or annual fees. Freedom to make free extra repayments or redraws.
- variable rate
- 6.14% p.a.
- comparison rate
- 6.17% p.a.
- variable rate
- 6.14% p.a.
- comparison rate
- 6.17% p.a.
- Upfront fees
- $299
- Ongoing fees
- $0.00
- Discharge Fee
- $250.00
- Extra repayments
- yes - free
- Redraw facility
- yes - free
- Offset account
- no
- Maximum loan to value ratio
- 80.00%
- minimum borrowing amount
- $150,000
- maximum borrowing amount
- $2,000,000
- type of mortgage
- Variable
- Repayment types
- Principal & Interest
- Availability
- Owner Occupier
- Repayment options
- Fortnightly, Monthly
- Special Offers
- -
Read our Mozo Review to learn more about the ING Mortgage Simplifier
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Basic Home Loan
Owner Occupier, LVR<60%, Principal & Interest
variable rate
comparison rate
Initial monthly repayment6.14% p.a.6.16% p.a.Enjoy a low rate home loan with $0 application fee and $0 ongoing fees. Flexibility to split your loan and set different repayment types. Fee free redraw from your loan using online banking. Flexible ways to repay. 40% Deposit required.
CompareCompareBasic Home Loan
Enjoy a low rate home loan with $0 application fee and $0 ongoing fees. Flexibility to split your loan and set different repayment types. Fee free redraw from your loan using online banking. Flexible ways to repay. 40% Deposit required.
- variable rate
- 6.14% p.a.
- comparison rate
- 6.16% p.a.
- variable rate
- 6.14% p.a.
- comparison rate
- 6.16% p.a.
- Upfront fees
- $350
- Ongoing fees
- $0.00
- Discharge Fee
- $400.00
- Extra repayments
- yes - free
- Redraw facility
- yes - free
- Offset account
- no
- Maximum loan to value ratio
- 60.00%
- minimum borrowing amount
- $150,000
- maximum borrowing amount
- $10,000,000
- type of mortgage
- Variable
- Repayment types
- Principal & Interest
- Availability
- Owner Occupier
- Repayment options
- Monthly
- Special Offers
- -
Read our Mozo Review to learn more about the Macquarie Basic Home Loan
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Mortgage tips to avoid paying LMI twice
If you’re one of the thousands of Aussies looking to refinance their home loan, but are hitting a wall when faced with prospects of having to pay LMI again, here are some ways to avoid the unnecessary expense:
- Save a 20% deposit before buying. The best cure is prevention, and if you’re able to save up a deposit of 20% of the loan amount or more (<80%LVR), you won’t have to deal with lenders mortgage insurance in the first place.
- Ask for a refund on your LMI premium. If you’re within the first or second year of your loan and decide to refinance, there’s a chance you could receive a partial refund of your LMI premium. No lender or insurer is the same, so it doesn’t hurt to ask.
- Pay down your loan amount before you switch. If you’re close to owning 20% of your property, it could be worth waiting until you have enough equity to switch without a hitch. This way, you’ll reap the full rewards of refinancing as you’re not putting your extra cash towards LMI.
- Ask your parents to be guarantors. You can avoid pesky LMI premiums by asking your parents to put their name next to yours on a home loan application. But since their home will be secured against your loan, it’s important you stay on top of repayments.
^ABS Housing Finance, Australia, September 2018
*APRA Quarterly Property Exposures
* WARNING: This comparison rate applies only to the example or examples given. Different amounts and terms will result in different comparison rates. Costs such as redraw fees or early repayment fees, and cost savings such as fee waivers, are not included in the comparison rate but may influence the cost of the loan. The comparison rate displayed is for a secured loan with monthly principal and interest repayments for $150,000 over 25 years.
** Initial monthly repayment figures are estimates only, based on the advertised rate. You can change the loan amount and term in the input boxes at the top of this table. Rates, fees and charges and therefore the total cost of the loan may vary depending on your loan amount, loan term, and credit history. Actual repayments will depend on your individual circumstances and interest rate changes.
^See information about the Mozo Experts Choice Home Loan Awards
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