That’s right, we are about to see the Lenders Mortgage Insurance costs slashed by 50% for First Home Loans.
Lenders Mortgage Insurance (LMI) has been used by Kāinga Ora with the First Home Loans which offers home loans with as little as a 5% deposit.
Lenders Mortgage Insurance is an insurance policy that protects the bank or lending institution against any financial loss in the event you’re unable to repay your home loan. It is charged by some banks and other lenders when the home loan is above the normal risk tolerance that they are prepared to accept on their own, effectively transferring the risk at the cost of the premium. The premium is normally a one off cost to the borrower.
Kāinga Ora have been charging 1% for the Lenders Mortgage Insurance (LMI) and allowing that to be added to the lending, but today the Government announced that it will reduce this for the First Home Loan scheme.
The insurance premium for borrowers will halve, from 1% of the value of the loan to 0.5% which is a massive saving. It is acknowledged that this reduction in premium will relieve some of the cost of homeownership for first home buyers in a time of rising interest rates.
The reducing the cost to toise successful applicants is expected to take effect from 1st June 2023.
This will help people get a smarter start onto the property ladder.
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