the future, page-46

You pay mortgage insurace on most loans over 80% loan to value ratio in Australia, so you are effectively paying to protect the bank from yourself. That money gets added to your loan you pay it back over the 30 years or so that loan lasts for. Premiums are calculated via a matrix they increase in both percentage incriments over 80% to 95% and in roughly $200k increments also. If you want to change lenders you have to pay this all over again as the premiums insure the bank and not the person, so they aren't portable.

Gap funding is an alternative, I use it when I can, as paying 6.5 or 7% on a term loan for say 5 to 10% of the property value normally works out being a lot cheaper than paying a 3% premium on the entire lend. Plus as a general rule you get an interest rate saving on the entire mortgage at 80% and below, that also gets factored into the overall savings.

Even developing a mortgage insurance offering that indemnifies the individual would be an awesome offering. As it would offer more choice and competition in the higher lvr lending space, allowing the policy holder to transfer that risk to another bank. How we had a Royal Commission into misconduct in the banking and finance sector and Mortgage Insurance never got a mention is beyond me.