Mortgage insurance is usually required when a lender provides a loan that covers more than 80% of the valuation the lender organises as a standard part of the loan approval process.
It is designed to cover the lender for their risk and protects them in the event that the property needs to be sold. If the lender suffers a loss on the sale, they claim payment from the mortgage insurance company. The insurer then pursues the borrower for the amount they paid the lender.
The clue is in the title and covers the lender only. The insurance offers the borrower no protection whatsoever and is a once off charge which can be added to the loan amount in certain circumstances. The price of the premium depends on the loan to value ratio of the property purchased, which you will find on another Resources page in this section.
Insurances that protect the borrower can be arranged such as income protection or life cover. We would refer you to our trusted financial planner for advice at the appropriate time in the process.
Marc has been a professional lender for 28 years. After beginning his career in 1990 with a UK Building Society, he moved to Australia where he held several different retail banking roles. In 1999 it became clear to him that a mortgage broker would eventually become an obvious choice for someone looking for a home loan so he took the plunge and became an independent broker. He hasn’t looked back since!