Lenders Mortgage Insurance
(L.M.I.) – Explained

Lenders Mortgage Insurance is a cost that your lender will pass on to you. Usually as a one off fee when setting up your home loan.

The Upside of L.M.I.

There is an up side of Lenders Mortgage Insurance. By utilising Lenders Mortgage Insurance, you have the potential to purchase a home sooner with a lower deposit. 

This may enable you to get into the housing market sooner, By doing so, the capital gains that you may make would outweigh the costs of lenders mortgage insurance.  Some lenders may allow you to borrow up to 95% of the purchase price.

Research the “Comps” (short for comparables)
Researching recent sales in the same area is the best place to start when looking at what to offer on a home you like.  When looking at these comparisons it is important to ensure that you are comparing with homes of similar:

  • Size, 
  • Land, 
  • Rooms, 
  • Facilities, 
  • Condition, 
  • Age and 
  • Position.  

It is also important to only compare with sold properties.  Only sold properties reflect the true price.  A property is not always worth what owners want for it – But it is always worth what buyers will pay for it.

If you are using a buyers agent they will be able to access detailed comparison information.

How long has the home been on the market?
Also known as “days on the market” (D.O.M.) – is another important factor to consider.  The number of days the home is on the market is directly related to how hard you might be able to negotiate.  No seller wants their house to sit on the market for too long.  The longer the house has been on the market, the more aggressive you may be able to negotiate.  Do your research first, as not all sellers are in a rush to sell.

What Condition is the Home in?
A home that is ready just to move in and “live” is more likely to receive higher offers than a renovator or a home that needs work.  Although some people are happy and enjoy this style of home.  Most buyers prefer not to have to deal with a renovator.

Get a qualified professional to check for structural and other serious issues that may affect the offer you submit.   A good buyers agent will be able to request a disclosure document from the vendor which discloses any potential issues.

Decide How flexible are you on Price?
If you don’t have much room to move within your budget, you can also use other negotiating tools to entice the seller by sweetening and being flexible with your offer. For example

  • Different contingencies
  • Length of settlement
  • Repairs
  • Rent back options