There are a number of misconceptions surrounding mortgage insurance, with many of them stemming from the fact that there are two types of insurance that are often mistaken for one another: Mortgage protection insurance or income protection and LMI.
While these two types of insurances serve different purpose, they are often taken out alongside a mortgage. Income protection will pay the homeowner’s mortgage repayments for a pre-agreed period of time while they are unable to work due to an illness. LMI protects the lender against a potential default on the home loan.
A potential borrower may question why the lender, and not the borrower benefits from LMI when it is the borrower who pays the premium. Both parties benefit, however, it is initially more apparent from the lender’s perspective.
For all other vital issues you need to know about LMI, read the latest issue of Your Mortgage out on sale now.
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