Is LMI Tax Deductible?

When home buyers take out a home loan, they have two options: wait until they have saved a deposit of 20% or sign on a mortgage with less down payment. If you choose the second option, in many cases, you will need to pay lenders mortgage insurance (LMI) before getting a mortgage finance.



What is lenders mortgage insurance (LMI)?

Lenders mortgage insurance protects the mortgage lender against losses they may incur if the borrower can’t repay the loan amount. While LMI only protects the lender, the cost is passed on to borrowers who are not able to meet deposit requirements. Some lenders may waive LMI if a borrower has a 15% deposit or if they belong to a profession that is eligible for an LMI waiver. LMI should not be mistaken with mortgage protection insurance (MPI). Mortgage protection insurance protects the borrower if they can’t repay their home loan for certain reasons such as injury, unemployment, accident or death.

Is LMI tax-deductible?

If the property you are looking to buy is an investment property, then LMI will be tax deductible. Lenders mortgage insurance can be depreciated over the first 5 years after buying the property. As a property investor, you can claim the interest paid on the loan amount to pay your LMI. Now, you know the answer to the question ‘Is LMI tax deductible on investment property?’.

Can LMI be refunded?

The answer is No. Once you have paid LMI, you can’t get a refund for this fee. On the other hand, if you want to refinance your home loan with a new lender, then you may have to pay LMI again if your loan-to-value ratio is above 80%. However, if you want to increase the value of your loan amount and want to stay with the same lender, then you don’t need to pay as much in LMI. Working closely with mortgage brokers at Star Homeloans can ensure that you make the right decision as per your needs.

For more information visit: Is LMI Tax Deductible

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