Partial refund on LMI


Q. I bought an investment property last year for $360,000 with a 10% deposit, and I paid around $5,500 lenders’ mortgage insurance (LMI). I’ve since heard that you can get a partial refund on LMI from your lender, if you pay down the mortgage within the first few years – is this true? I recently inherited $25,000 and I’m considering using this to pay down the loan.
A. It is possible in some circumstances to obtain a refund of the LMI premium.
In our experience, this is possible when the loan is completely paid out within the first year. It is the mortgage insurer, rather than the lender, who calculates and pays the refund. The refund will vary on a case-by-case basis, but typically it will be about 50% of the mortgage insurance premium.
So if you pay your loan out within the first year, you should ask your lender to arrange a refund from the mortgage insurer. It would be wise to put the refund into your new loan, which will result in substantial interest savings over time
Even if you can’t obtain a mortgage insurance refund, using the $25,000 to pay down the loan will save you money. Most loans calculate interest daily based on the balance of the loan. So, the $25,000 payment will save you interest.
Based on an interest rate of 9%, the monthly saving would be around $187, and the compound savings over the term of the loan would be many thousands of dollars. You should treat your home loan as a safe place to deposit funds and ‘earn’ the interest rate you are currently paying for your loan. But remember, you will need to check with your lender that you can redraw funds from your loan if you need them and if there is a redraw fee.
The experts
Greg Clough
is a mortgage broker and CEO of Onyx Home Loans, a privately-owned mortgage originator retailing its own brand of home loan products. Visit:
Margaret Lomas
is the founder of Destiny Financial Solutions, a qualified financial advisor and the author of five bestselling property investment books. She is the 2006 Telstra NSW Businesswoman of the Year. Visit:
Christopher Battern
is a tax specialist and the CEO of, a web portal that provides tools for investors and small business owners to help them navigate the challenges of investing, developing, acquiring property and running a self managed superfund. Visit:

With interest rates at their lowest for more than 50 years, there are some great rates available. The best thing to do is to compare rates from all the lenders. Let us help take the leg work out of doing this - Compare Home Loans now

Top Suburbs : trott park , freshwater , midland , homebush , penrith

go back

Get help with your investment property

Do you need help finding the right loan for your investment?

When investing in property, it is important to make sure that you not only have the lowest available rate that you can get, but also have the correct loan features for your needs.

Just fill in a few details below and we'll then arrange for a local Aussie Mortgage Broker to contact you and work out what features or types of loans are right for your needs. We'll even help with the paperwork. Plus an appointment is free.

How soon would you like a mortgage?
What is your Annual Household Income i $
Do you currently own any Investment Properties?
Do you own your own residence?
How much equity do you have in all your current properties?
First Name
Last Name
Where do you live?
What number can we reach you on?
E-mail address
We value your privacy and treat all your information seriously - you can check out our privacy policy here