Mortgage insurance is the “dirty little secret” of home loan costs and needs to be overhauled now, according to the Finance Brokers Association of Australia (FBAA).
FBAA national president Peter White says many consumers are paying tens of thousands of dollars more than they should on their mortgages because of a system that favours the insurers and banks.”Many homeowners don’t understand the insurance and until recently, banks didn’t even have to disclose the details,” he said.
“Thanks to the FBAA’s efforts, LMI now needs to be disclosed, but this is just the start.”
He said the biggest problem was the lack of portability, meaning that each time a borrower changes lender, they pay a new LMI premium.
“There are only basically two overall mortgage insurers so in many instances consumers are paying the same insurer twice for the same loan amount on the same property. It’s wrong!”
Even more distressing to homeowners, a refund of mortgage insurance is available during the first 18 months, yet rarely has anyone claimed the refund because there has been no disclosure statement issued in the past.
“The insurers don’t offer to refund unless the client asks, but clients didn’t know to ask because the insurer has never been obligated to disclose that a refund was available. It’s ludicrous.”
The answer is to make LMI portable, says Mr White. “Consumers should have the right to transfer it from loan to loan and from property to property.
Media Contact: Lyall Mercer – 0413 749 830