Did you know that if you repay your home loan within the first two years you may be eligible to receive a partial LMI refund?
Many lenders don’t notify their customers about this or they require you to complete a form in order to receive it.
Most borrowers miss out so don’t be one of them!
Are LMI refunds still available?
Most lenders have changed the agreements with their Lenders Mortgage Insurance providers so that customers pay a lower LMI premium.
While LMI premium is generally not refundable, depending on the arrangement between the lender and LMI provider, you could be entitled to a partial refund of the LMI fee.
These changes are being undertaken in accordance with the new Banking Code of Practice.
If you meet the criteria stipulated by the lender, then you could get a partial refund on your LMI.
Can my LMI policy be transferred?
At present, it’s not possible to transfer your LMI policy to another lender. You can get a discount on your new LMI premium if you stay with the same lender and increase your loan or internally refinance to a new loan.
There has been political pressure and suggestions within the mortgage industry that LMI portability should be allowed to make it easier for people with loans over 80% of the property value to change lenders without paying another LMI premium.
While this would be great for customers, it simply would not work for lenders with the way that they fund their loans and because they each have unique agreements with their mortgage insurers.
General requirements for an LMI refund
If you’re exiting your loan, use the below guidelines to find out if you may be eligible, then call your lender to confirm.
- The loan must not have been in default, arrears or had any late repayments.
- The loan must have been repaid less than two years from the date it settled.
- The refund amount must be greater than $500.
Please note the mentioned policies are for the two main LMI providers in Australia. However, each lender may have made a separate agreement with these providers. You should contact your lender to confirm their policy for your mortgage.
Genworth Financial no longer offers LMI refunds with any of their lenders. They will only offer a discount on their LMI premium if you’re increasing your loan or refinancing your loan and remaining with the same lender (this is known as an internal refinance).
- The loan must not have been in default or arrears.
- The refund amount must be more than $500.
- The insured mortgage must be repaid in full (not a partial discharge).
- A refund is due only if the loan is repaid in the first year after settlement.
- The lender must notify QBE LMI that a refund is due within 30 days of the loan being discharged.
- The amount of the partial refund will depend on the arrangements between QBE and the lender.
Westpac LMI (WLMI)*
- Loan repaid in 12 months or less: You may be entitled to a refund of 40% of the LMI premium (minus stamp duty).
- Loan repaid between 12-24 months: You may be entitled to a refund of 20% of the LMI premium (minus stamp duty).
- A minimum refund amount applies so if the refund is less than the minimum, you’re not eligible for a refund.
- LMI refund approvals are decided by WLMI, not the bank.
*Note: Westpac is the mortgage insurer for Westpac, St George and Rams but not all of their home loans will be insured by WLMI. Where there is a different LMI insurer for your mortgage, the above LMI refund policy may not apply.
ANZ LMI refund
- Loan repaid in 12 months or less: You may be entitled to a refund of 50% of the LMI premium (minus stamp duty).
- Loan repaid between 12-24 months: You may be entitled to a refund of 25% of the LMI premium (minus stamp duty).
- The LMI refund only applies to loans settled on or after 1 October 2017.
- The mortgage balance must be repaid in full – LMI refunds will not apply to loans that have been partially discharged, refinanced internally with ANZ, or consolidated with other loans.
- The property security must not continue to secure any other loans in your name (as the borrower).
- LMI refund approvals are decided by ANZLMI, not the bank.
You should always contact your lender for information regarding the refund of an LMI premium.
- Adelaide Bank: Uses QBE or Genworth policy, automatically applies for LMI refunds at the end of each month.
- BankWest: Will refund 25% if the loan is repaid in the first 12 months.
- CBA: No LMI refunds are available.
- Liberty Financial: 30% of the LMI premium is refunded if you repay the loan in the first year and 15% if you repay the loan in the second year. You must request the refund. No refunds are available for low doc loans.
- Homeside Lending: No LMI refunds are available.
- NAB: LMI refunds will only be available for loans settled on or after 25 November 2019. There are partial refunds available if a home loan was discharged within 24 months of drawdown. 40% of the premium is refunded if discharged within 12 months, and 20% of the premium is refunded if discharged within 24 months.
- St George Bank: 40% of the LMI premium is refunded if you repay the loan in the first year and 20% if you repay the loan in the second year.
- Westpac Bank: 40% of the LMI premium is refunded if you repay the loan in the first year and 20% if you repay the loan in the second year. You must request the refund.
Not all lenders publish their refund policy or procedure. We recommend that you assume your lender will require you to apply for a refund. It’s best to contact them and confirm their refund policy once your loan has been discharged.
How to request a refund
Call your lender’s customer service department and explain to them that you are requesting an LMI refund. They’ll then inform you of their procedure and may ask that you provide them with a written request.
Premium refunds can take upwards of three months as they are processed in batches. However, we recommend that you follow up regularly to make sure that your refund is processed. This type of request is not classified as urgent by most lenders, so it’s likely to be forgotten if you’re not diligent.
Save money on your LMI premium
For your next home loan, why don’t you shop around to find the lowest LMI premium as well as the lowest interest rate. Each lender has a different agreement with their mortgage insurer and so has different premium rates.
In some cases, lenders also offer discounts or special offers for a limited time. Please visit our mortgage insurance calculator page to compare premiums.