Lenders Mortgage Insurance, or LMI, is a one-time fee that helps people buy a home with a smaller deposit. It’s charged when you borrow more than 80% of a property’s value, meaning your deposit is less than 20%. 

LMI protects the lender, not the borrower, if the loan can’t be repaid. While it adds a cost, it allows you to enter the property market sooner instead of waiting to save a larger deposit. 

When is LMI Required? 

LMI is generally required when: 
• Your loan-to-value ratio (LVR) is above 80%. 
• You have less than a 20% deposit. 
• You don’t qualify for an LMI waiver or government guarantee. 
• You don’t have a guarantor on your loan. 

Some lenders may reduce or remove LMI for: 
• Professionals in fields such as medicine, law, or accounting. 
• Borrowers using government or first home buyer guarantee schemes. 
• Applicants with strong financial profiles. 
• Loans supported by a guarantor. 

Can You Avoid Paying LMI? 

In many cases, yes. You can avoid or reduce LMI by: 
• Saving a 20% deposit before applying. 
• Using a guarantor who offers additional security on the loan. 
• Qualifying for an LMI waiver through your profession. 
• Applying through an eligible government scheme. 

How Much Does LMI Cost? 

The cost of Lenders Mortgage Insurance (LMI) depends on how much you borrow and the size of your deposit. The smaller your deposit, the higher the LMI premium will be. 

For example 
• A $700,000 loan at 90% LVR might cost around $12,000–$17,000 in LMI. 
• A $700,000 loan at 95% LVR could exceed $25,000. 

You can either pay LMI upfront or add it to your home loan (known as capitalising), which means you’ll pay it off over time with your regular repayments. 

Pros and Cons of LMI 

Pros 
• Buy a home sooner with a smaller deposit. 
• Enter the market before prices rise further. 
• Borrow up to 95% of a property’s value. 
• Access a wider choice of locations or property types. 

Cons 
• Adds a significant cost, sometimes tens of thousands of dollars. 
• Protects the lender, not the borrower. 
• Usually non-refundable if you refinance or pay off your loan early.