Can a Guarantor Help You Avoid Lenders Mortgage Insurance?
Lenders mortgage insurance (LMI) is one of the biggest upfront costs for buyers with smaller deposits. Many borrowers use guarantor loans specifically to avoid paying this premium. Understanding whether a guarantor can help you avoid lenders mortgage insurance can help you decide if this option is worth considering.
What Is Lenders Mortgage Insurance?
Lenders mortgage insurance protects the lender — not the borrower — if a loan defaults. It’s usually required when you borrow more than 80% of a property’s value.
The cost can run into tens of thousands of dollars depending on the loan size.
How a Guarantor Changes LVR
When a guarantor provides security, part of the loan is secured against their property. This reduces the loan-to-value ratio on the property you’re buying.
By bringing the effective LVR below 80%, lenders may waive LMI.
Does Every Guarantor Loan Avoid LMI?
Not always. The structure of the guarantee and the lender’s policy determine whether LMI is avoided.
A properly structured limited guarantee is usually required to remove LMI.
Comparing LMI vs Guarantor Risk
While avoiding LMI can save money upfront, a guarantor loan transfers some risk to a family member.
It’s important to weigh the cost of LMI against the responsibility a guarantor takes on.
Why This Matters for Australian Borrowers
Australian property prices mean LMI costs can be substantial. Guarantor loans can provide a way around this, but only when structured carefully.
How The Finance Brokers Can Help
The Finance Brokers compare guarantor and non-guarantor options to determine the most cost-effective approach. They structure guarantees to minimise risk while maximising LMI savings.
Want to Avoid Paying LMI?
If you’re considering a guarantor loan to reduce upfront costs, expert advice can help you choose the safest and most suitable option.
Book a free consultation with The Finance Brokers
Final Thoughts
A guarantor can help you avoid lenders mortgage insurance in many cases, but the loan must be structured correctly. Understanding both the savings and the responsibilities involved helps families make informed decisions.
