LMI Refunds making a comeback?

Just received a broker email from ANZ saying they will reintroduce LMI refunds under certain circumstances. It used to be common practice, but all lenders gradually discontinued the practice, hopefully others will follow ANZ

Here is more:
ANZ may (but is not required to) give you a partial refund of the premium you paid for a Lenders Mortgage Insurance policy for your loan if that loan is repaid early, subject to the following:
1. The policy was issued on or after 1 October 2017.
2. The loan is repaid in full (e.g. not partially discharged or refinanced internally within ANZ or consolidated with other loans) within 24 months from the date the policy commenced.
3. The policy is fully terminated (e.g. does not continue in respect of other loans).
4. The policy is not subject to any claim at the time the loan is repaid in full.
5. Any security given in relation to the repaid loan does not continue to secure any other loan you have.
6. If ANZ gives you a refund, the refund amount will be: a) 50% of the premium you paid, if the loan was fully repaid within 12 months from the date the policy commenced; or b) 25% of the premium you paid, if the loan was fully repaid within 24 months from the date the policy commenced.

 

The current situation of no refund, no portability for LMI is a rort, I was hoping it would get some focus from the Royal Commission. ANZ's move is a step in the right direction, although it's a bit tokenistic. It takes a good 5+ years to pay down from 90% to 80% LVR when property values arent increasing, so an LMI premium generally insures more than just the first 2 years of a loan.

The only reason I can think ANZ would do this is to act first out of fear of being regulated to do it on less-favorable (read: fairer to customers) terms. In a world of declining property prices and equity, the harsh reality of having to pay full LMI again to access a refinance will really start to be noticed.

I expect a few other lenders will follow suit. So that the industry isn't left flat-footed when the ACCC or the productivity commission inevitably start making noises about it.

 

Exactly @Rolf Latham - true LMI portability makes sense, is equitable and would fix the problem. Not going to hold my breath though.

 

So I read this as if you paid 10k in LMI and then refinanced to another lender after 2 years then you would receive back 2.5k of the initial premium?

 

that is how I read it too.
This will encourage people to refinance perhaps - and to pay down their loan asap while adding value.

 

Honestly, shouldn't even be a consideration though should it.

Spend less, save more, buy well, borrow less, add value. Repeat.

 

Anyone happen to know if Firstmac LRF has a partial refund if paid out within 24 months?

 

I don't think so.