Lenders Mortgage Insurance (LMI)

What is Lenders Mortgage Insurance (LMI)?

Lenders Mortgage Insurance (LMI) is a one-time premium that protects the lender (not you) if you default on your loan. It's typically required when you borrow more than 80% of the property's value.

While LMI is an additional cost, it can allow you to buy sooner with a smaller deposit rather than waiting years to save 20%.

When Does LMI Apply?

Less than 20% deposit: LMI is required when your Loan-to-Value Ratio (LVR) exceeds 80%.

Borrowing capacity: Some lenders may require LMI at high borrowing levels even with a 20% deposit.

Guarantor scenarios: Using a guarantor can help avoid LMI.

How Much Does LMI Cost?

LMI costs vary based on your LVR and loan amount. Here's an example:

Property Value

$600,000

Deposit (10%)

$60,000

LMI Cost (est.)

$12,000-$18,000

* LMI can often be added to your loan amount, reducing upfront costs.

Benefits of LMI

Enter the market sooner

Start building equity instead of waiting to save 20% deposit.

Benefit from capital growth

Property appreciation can outpace waiting time to save a larger deposit.

Preserve cash reserves

Keep savings for moving costs, renovations and emergencies.

Ways to Avoid or Reduce LMI

Save a 20% deposit: The most straightforward way to avoid LMI.
Use a guarantor: Family equity can replace LMI requirements.
Professional exemptions: Some lenders waive LMI for eligible professionals.
Government schemes: Check schemes like the First Home Loan Deposit Scheme for exemptions.

Mortgage Insurance