LMI paid again if refinance?

Hi all,

I was wondering if the LMI has to paid to the new lender again if I refinance?

Cheers,

Ben

 

Depends what the new valuations comes back as

 

If the LVR is above 80%, I think so

 

If borrowing more than 80% then yes.

Unless you qualify for a 90% no LMI lend (medical profession for instance).

Cheers

Jamie

 

In 2011 Wayne Swan announced he'd made it easier for borrowers to "Vote with their feet," by removing early repayment penalties from home loans. Unfortunately he forgot a few things:
* Government fees in moving - between $230 and $400 (depending on what state you're in).
* Not making LMI portable - for higher LVR loans, this is eclipses any other cost.

To be fair, it's not an easy problem to tackle. Different lenders have different risk profiles and thus different rates for LMI. It's like trying to move your home contents policy from one house to another.

So unfortunately if you move loans and LMI is applicable, you pay from scratch.

Many years ago it was possible to get a partial refund for LMI paid if you closed the loan within a certain time frame. This died around 2008.

 

@Peter_Tersteeg
I've thought about the whole LMI being transferable a few times. Whilst first thought would suggest it's a good idea, I really don't think it would help.
If it was transferable that would mean the insurers are losing out on revenue, they would look to make this up elsewhere... by increase cost of all premiums
Which would mean those who're not refinancing have just picked up the bill for those that want to chop and change between lenders.
Would you see it going any other way? Not too often businesses take hits the bottom line without making it up elsewhere, especially in a market with limited competitors.
And that's not even touching on the different risk/policy/limits/dua for each bank.

 

Yes new LMI. But old LMI can be written off in this tax year if LMI paid less than 5 years ago.

 

@Brady I agree. It's not a problem that can be reasonably solved in a manner that is advantageous to borrowers. It's just irritating that the government at the time made the whole thing into a big political point scoring exercise but didn't really achieve anything useful.

 

If refinancing with the same bank do you have to repay LMI?

e.g. I buy for 1,000,000 at 88% lvr and pay LMI. House prices rise and I release equity back up to 88% with the same lender. Do I repay again?

 

Done properly, you'll only pay LMI for the increase.

Essentially they calculate the LMI premium for the total loan and credit you back the LMI you paid previously. You only pay the difference.

 

But take care if you are using a mortgage manager such as Homeloans Limited -there could be LMI payable if hte lender changes

 

Non-transferrable which is why lender selection for LMI deals is incredibly important and not just a rate shopping exercise. Utilise the right lenders and you can recycle those LMI credits to keep pulling equity at higher LVR's.

 

Agreed - standard politics at play, making out they're solving a problem - when it hardly touches the surface.