Hold the LMI

NAB subsidiary UBank has announced that it will only require borrowers to provide a 15% deposit in order to avoid lender’s mortgage insurance.

Homebuyers who have not accumulated a 20% deposit will be able to avoid thousands of dollars in insurance costs under the new initiative, according to perthnow.com.au.

Under the new policy, a borrower taking out a loan of $480,000 could avoid $5,000 in fees if they have saved a deposit of $72,000 – 15% – instead of $96,000, or 20%.

UBank CEO Philippa Watson said reducing the LMI threshold would eliminate months of saving for home buyers.

“We know saving for a home deposit takes an average of 4.6 years, rising to over eight years for Sydneysiders,” Watson said. “By only requiring a 15% deposit and waiving the need for lender’s mortgage insurance, UBank can help shave nearly seven months off the process.”

Watson said that LMI could add tens of thousands of dollars to the cost of a mortgage.

“Lender’s mortgage insurance protects the bank, it doesn’t protect the customer,” she said. “So the amount people pay towards lender’s mortgage insurance is money ideally which can be put into their deposit or paying down their loan.”

Watson said that a reduced deposit could mean a borrower would be able to buy a property sooner, potentially saving thousands in a market where prices are on a constant upswing.

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UBank will offer loans with a loan-to-value ratio between 80% and 85% with a variable interest rate of 2.49% or a three-year fixed rate of 2.05%, according to perthnow.com.au.

The bank also offers one of the lowest three-year fixed rates at 1.85% for LVRs less than 80%.

Ryan SmithRyan Smith is currently an executive editor at Key Media, where he started as a journalist in 2013. He has since he worked his way up to managing editor and is now an executive editor. He edits content for several B2B publications across the U.S., Canada, Australia, and New Zealand. He also writes feature content for trade publications for the insurance and mortgage industries.
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