Compute Your Lenders Mortgage Insurance (LMI) at 90% LVR

1. What Are LMI and LVR?

Lenders Mortgage Insurance (LMI) is a premium charged by lenders when your Loan-to-Value Ratio (LVR) exceeds 80%. It protects the lender if you default.

LVR is the ratio of your loan amount to the property’s value, expressed as a percentage. At 90% LVR, the lender finances 90% of the property’s purchase price or valuation.

2. Identify Your Key Figures

Property Value: The purchase price or latest valuation.
Loan Amount: 90% of the property value.
LMI Rate: Varies by lender and borrower profile, typically between 0.5% and 4% of the loan.

3. Example Calculation

Suppose you’re buying a home worth $600,000 and borrow 90% of its value:

Loan Amount: $600,000 × 0.9 = $540,000
Estimated LMI Rate: 1.8%
Premium: $540,000 × 0.018 = $9,720

You can either pay this premium upfront or add it to your loan balance (“capitalise” it).

4. Factors That Influence LMI

Higher LVR and larger loan amounts increase the premium.
Investment loans, lower credit scores or smaller deposits may push rates up.
Some first-home buyer programs waive LMI entirely for eligible borrowers.

5. Tax Treatment of LMI

Owner-occupiers: LMI is not tax-deductible.
Property investors: You can claim LMI as a tax deduction over five years.

Final Tip

For the most accurate LMI figure, try an online LMI calculator or consult a mortgage broker. Comparing different lenders can uncover lower LMI rates or smaller deposit requirements.

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