- Target:
- The Hon Wayne Swan MP
- Region:
- Australia
- Website:
- www.causes.com
When a borrower gets a Home Loan from a lender and the loan amount is more than 80% of the purchase price or valuation (whichever is the lesser amount) then the lender gets Lenders Mortgage Insurance to cover them for any of the debt not recoverable by foreclosure sale or settlement but this premium is paid by the borrower.
This premium is $,000's and though it covers the lender for the term of the loan which averages 25-30 years it is non-refundable after a maximum of 2 years and as soon as a loan is funded your immediate refund amount is a maximum of 40% of the premium even if you pay it out within the first week of the loan being funded. Essentially if you refinance or payout your loan within the 1st year you will only receive a refund of 40% of the premium and 30% in the second year, after that you get nothing back even though the premium is to cover the loan for the whole of its term.
If you want to refinance your loan to another lender in many instances you will have to pay a discharge fee to the lender you are leaving and then an application fee to the new lender and then because usually within the first few years of your loan the value hasn't increased much in your home so if the refinanced loan is greater than 80% of the value of the home you will again have to pay the Lenders Mortgage Insurance premium which is again up to $,000's so high value loan borrowers are usually stuck with putting up with unfair interest rates and fees or change and have to pay $'000's for the Lenders Mortgage Insurance with the new lender.
As there are 2 main Lenders Mortgage Insurance Providers in Australia and any of the lenders can use either provider then as long as the refinanced loan amount doesn't exceed the original loan amount and is in the same borrower names and for the same property there is no reason why the beneficiary of the Lenders Mortgage Insurance Premium cannot be changed to the new Lender. Any additional funds that may need to be borrowed over and above the original loan amount due to discharge and refinance costs then LMI providers should be paid a small additional amount like a loan increase with the existing lender if the borrower didn't change lenders.
This would make it more affordable for borrowers to change to Lenders with more beneficial loans available for them and increase competition in the finance market place.
If a borrower wants to refinance their loan to another lender in many instances they will have to pay a discharge fee to the lender they are leaving and then an application fee to the new lender and then because usually within the first few years of their loan the value hasn't increased much in their home so if the refinanced loan is greater than 80% of the value of the home they will again have to pay the Lenders Mortgage Insurance premium which is again up to $,000's so high value loan borrowers are usually stuck with putting up with unfair interest rates and fees or change and have to pay $'000's for the Lenders Mortgage Insurance with the new lender.
As there are 2 main Lenders Mortgage Insurance Providers in Australia and any of the lenders can use either provider then as long as the refinanced loan amount doesn't exceed the original loan amount and is in the same borrower names and for the same property there is no reason why the beneficiary of the Lenders Mortgage Insurance Premium cannot be changed to the new Lender. Any additional funds that may need to be borrowed over and above the original loan amount due to discharge and refinance costs then LMI providers should be paid a small additional amount like a loan increase with the existing lender if the borrower didn't change lenders.
This would make it more affordable for borrowers to change to Lenders with more beneficial loans available for them and increase competition in the finance market place.
The government doesn't want to regulate the Lenders but they want to increase competition and make it better for borrowers to choose a more affordable option for their Home Lending so the first step would be to makeover the Lending Mortgage Insurance provisions to allow the transfer of Lender beneficiary to alleviate the financial burden on high value % borrowers and allow them to refinance to a more affordable Home Loan.
You can further help this campaign by sponsoring it
The Lenders Mortgage Insurance to be made portable or paid by the Lender petition to The Hon Wayne Swan MP was written by Kylie Curry and is in the category Miscellaneous at GoPetition.