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A recent survey conducted by Mortgage Choice has shown that 25% of buyers do not understand what Lenders Mortgage Insurance (LMI) is.
Out of the 1,000 people who took part in the survey 8% thought that LMI protected them with almost 18% thinking that it protected both them and the lender. Buyers in the age bracket of 18-29 were the most likely not to know what LMI was with a higher proportion of women (45%) not knowing what LMI is versus 37% of men.
On a State by State comparison, Victoria had the highest proportion of buyers who did not know what LMI was (46%) followed by Queensland (40%), Western Australia (39.6%) with NSW the most knowledgeable State coming in at 34.6%
CEO for Mortgage Choice, Susan Mitchell, said in a statement, "For many first home buyers, LMI is likely to be a cost they have to pay to get into the property market, particularly if they do not have a deposit that is at least 20% of the purchase price. The reality is that saving for a home deposit is a major challenge for first home buyers and this has been the result of strong price growth over the last few years."
Ms Mitchell went on to say that it was concerning that a large proportion of Australians had either a limited or no understanding of LMI and that lenders should take an active role in educating borrowers.
For a detailed explanation as to what LMI is visit the Lenders Mortgage Insurance entry on Wikipedia.