Lenders Mortgage Insurance?
 

So this is in place if I default, the bank sell house and if it doesn't reach what is owing, the LMI bridges the gap.

Correct so far I think??

If so how do you put this into place ... and what's the repercussions?

Re: Lenders Mortgage Insurance?
 

I could be wrong but I don't think you put in in place, I think it's compulsory if you are borrowing over a certain percentage of the asking price (i.e. 90%). You have to pay for it, but the lender benefits should it ever be used.

Not sure what you mean by the repercussions - do you mean how much does it cost?

Re: Lenders Mortgage Insurance?
 

No I've got a house that isn't worth what I owe. I paid $10k for the LMI and am wondering can I just give the keys back to the bank and walk away. In theory the LMI will cover any shortfall.

Re: Lenders Mortgage Insurance?
 

Oh right, sorry I have no idea - brand new to this whole Australian property thing.

Hopefully somebody with a bit more knowledge will be along in a minute. Sorry to hear you are in that situation though, not so good, hopefully things will pick up a bit for you :)

Re: Lenders Mortgage Insurance?
 

Cheers ... :)

Re: Lenders Mortgage Insurance?
 

Lenders mortgage insurance is an insurance for the bank and will cover their shortfall should the sale of the property not cover the outstanding mortgage you have with them. However, the company providing the insurance can still chase you for the amount they have paid out. If you are having financial difficulty, your back is obliged to work with you to see if they can sort something out before repossession of your property is necessary. The biggest mistake people make is not speaking to their bank before it becomes a major problem and is too late.

Re: Lenders Mortgage Insurance?
 

But if I make a claim on my car insurance policy, they don't come after any money after do they ... :confused:

I've been in touch with the bank who are happy taking $500pm from me. The rest of the monthly payment ($2,500) is just getting dumped into my bank account as overdrawn! ... :frown:

4 months and i'll owe $10,000 ... :eek:

Re: Lenders Mortgage Insurance?
 

I dont know about that: because we were in a accident and the other party didnt have insurance, our insurance paid our claim but said they would recover the money from the uninsured at fault driver. :unsure:

I know claims made on the master builders insurance, they pay the client and recover it from the Builder even if its not the builders fault!!!! Happened to us, owner of house removed windows to fit in piano, then they leaked and we had to cough up - bloody furious.

Gawd knows have you spoken to legal aid or the bank. The bank wont usually sell the house for less than the mortgage amount, been to auctions like that and the documents that come with it are a phone book long, and the reserve is the mortgage price.

Re: Lenders Mortgage Insurance?
 

The house would prob go for what we owe, but we can't afford the commission the real estate would want, or legal or any other fees ... :(

Re: Lenders Mortgage Insurance?
 

There are very few legal fees in the sale. i usually do the legal work myself on the sale - but it costs only about $600.

Have you considered the low fee agency for sale, some do fixed commission of around $5900, however I think bank sales are normally ray white who do the 5% thing.

Re: Lenders Mortgage Insurance?
 

Do a search on the term "Subrogation".

If you make a claim on your car insurance, then the insurance company has the right to sue whoever caused the issue leading to the claim.

Similarly, if the bank has to claim on its insurance policy, it signs over the right to chase you for the shortfall to the insurance company.

Of course if you go bankrupt your debts (subject to exceptions) go away but that is a drastic step. If you really have no money then you should negotiate with the bank or insurance company to accept a lesser amount in full and final settlement, they don't have to say yes but then you don't have to pay and they can take their chances in a bankruptcy.

Re: Lenders Mortgage Insurance?
 

Yeah I think it was only $500 odd for the solicitor with the buy, but the seller paid the real estate agent $13k for the sale ... :eek:

A friend was saying there's a company that will advertise your house on realestate.com for $300, and if it sells you only pay them $2000 on top, but it's all too disheartening TBH. it's a house we love, but with OH not working, and no sign of a job, we're just gonna get into more debt if we stay put.

Tried calling the bank but rings out ... :rolleyes:

Re: Lenders Mortgage Insurance?
 

LMI protects the lender [the bank] not you. If they repossess and the sale doesn't cover the debt [which it often won't since the bank will quickly want to realise their security] the insurance company will pay out the shortfall to the bank.

The nasty bit is, the insurance company will then come after YOU for the shortfall they have had to pay out.

LMI is of no use to the home owner whatsoever - its to protect the bank in the event of a default. The idea of handing back the keys is an American concept which doesn't exist here - you are still liable for any shortfall between the sale price and the mortgage debt.

Re: Lenders Mortgage Insurance?
 

Have negotiated with the bank. Mortgage is currently $2,870pm and we settled on me paying $500. The other $2,370 has just been slapped into my current account, and needless to say am now $2,370 overdrawn.

Next month that goes up to $4,740 and so on.

Lose lose situation it appears!

Re: Lenders Mortgage Insurance?
 

Go into a branch and see them in person then. They will pass you onto someone else but at least its a start. Contrary to what you might thank, repossession is the last resort of the bank since they lose the ongoing revenue stream from the mortgage - it's better for them also to find a way [if possible] to keep the mortgage alive.