The attached article was printed in the 3 August 2022 edition of The Age. It describes a situation of which I was blissfully unaware – that home mortgage insurance is not portable. If you have less than a 20 per cent deposit for a real estate purchase you are required to buy expensive insurance to protect the lender in instances of a default and subsequent sale if the sale price is lower than the loan amount. And it is truly eye wateringly expensive – think five figures for most home loans. And this amount is also either part of your loan – and you get to pay interest on it – or you need a bigger loan because a large chunk of your equity just got siphoned off to pay for the insurance so, you guessed it, you get to pay interest on it. But, and here’s the crux of the story, if you want to change lenders in search of a better interest rate for example, and you still have less than a 20 per cent deposit, you have to buy a new insurance policy! These policies are not portable.
Read on friends and get into this article. Of particular relevance are the comments of those in the lending industry. None quoted offer an explanation for this, only lame ideas about paying down your loan (der) or trying to refinance with existing lender if you want a better interest rate. Tell me, how successful do you think that option would be if the lender knows they have you over a barrel?
There appear to be only a small number of providers of this product, so lack of competition may be a factor. But it might also be in the banks’ interest to make it difficult for borrowers to move lenders.
I was disappointed to note that the author did not seem to press further about why this product is not portable. Perhaps one suggestion- and I stress it is only that as I have no evidence, just a suspicion – is money. Here’s a set of questions to ponder. Does the bank get any recompense from the insurance providers to selling the product? If so, is it just a simple fee or does it include a trailing commission? Is there an incentive for banks and insurers to work together – even implicitly – to make this a very unsatisfactory market from the consumers’ perspective?
What do you think? I’d be thrilled to have answers.
Does this make sense 
Yes it’s pretty awful. It’s why we put a large chunk into Kierans house so he could avoid mortgage insurance. As a single person, he couldn’t have afforded the mortgage repayments otherwise. So now he’s got repayments within his range if he watches his budget, given current rate increases.
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