How does LMI get paid?
LMI is charged as a one-off cost by the LMI provider to us. We pass on this cost as an LMI fee to you and no more. The LMI fee is generally added to the amount you borrow and payable at draw down. In some cases, you may be able to pay this upfront using your own funds – speak to us to find out more.
Is LMI refundable or transferable to another financial institution?
LMI is not transferable to other financial institutions. You may be entitled to a partial refund of the LMI fee if you meet these conditions.
If your settlement or drawdown date was on or after 10th June 2024, you’ll be refunded:
- 40% of your LMI fee if you repay and close your home loan within 12 months of the date of settlement or drawdown.
You won’t be refunded any of your LMI fee if you repay and close your home loan after 12 months of the date of settlement or drawdown
If your settlement or drawdown date was between 25th November 2019 and 9th June 2024, you’ll be refunded:
- 40% of your LMI fee if you repay and close your home loan within 12 months of the date of settlement or drawdown.
- 20% of your LMI fee if you repay and close your home loan between 12 and 24 months after the date of settlement or drawdown.
You won’t be refunded any of your LMI fee if your drawdown or settlement date was before 25th of November 2019. If you wish to refinance to another lender, you may need to pay LMI again with your new lender if you do not meet their minimum deposit requirements.
What if I'm unable to make my home loan repayments?
If you are unable to make your loan repayments and default on your home loan, your property may be sold to cover the outstanding loan amount. If the property is sold for less than the outstanding loan amount, NAB will incur a loss and submit a claim to the LMI provider. The LMI provider pays NAB this amount (subject to the LMI policy) and the LMI provider or their authorised third-party debt collector may then seek to recover this amount directly from you as the borrower, or any guarantors.
For example:
Peter and Emma buy a home valued at $750,000. LMI is required and included (or capitalised) into the loan amount of $700,000. Unfortunately, Peter and Emma are unable to meet their loan repayments and default on their loan. The property is sold for a loss at $650,000. The outstanding loan balance at the time of sale is $725,000 made up of the original loan amount, unpaid interest that has accumulated during the default period and other fees/charges associated with the sale. This means there is a shortfall of $75,000 (being the difference between the outstanding loan balance of $725,000 and the sale proceeds of $650,000). In this case, the LMI provider would, pay NAB the shortfall. The LMI provider may then seek repayment of this amount from Peter and Emma.
LMI versus Mortgage Protection Insurance (MPI)
LMI should not be confused with Mortgage Protection Insurance (MPI). MPI covers you if you’re unable to meet your mortgage repayments due to unemployment, death or disability. MPI protects you, whilst LMI protects the lender.
Experiencing financial difficulties
If you’re experiencing financial difficulties or think that you may be unable to make your home loan repayments, contact NAB Assist on1800 701 599. Our NAB Assist team will assess your situation and work with you to help get you back on track.
