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Guide · LMI

Lenders Mortgage Insurance — the honest answer.

LMI protects the lender, not you. It can add $10,000–$40,000 to a purchase and most buyers don't realise they're paying it until the contract is in front of them. Here's how it works, what it costs, and the three legitimate ways out.

Reviewed · Adam King — 30 years in finance, Sunshine Coast

What LMI actually is

Lenders Mortgage Insurance is a one-off premium the lender charges when your deposit is below 20% of the property's value — or, in lender language, when your Loan-to-Value Ratio (LVR) is above 80%. The premium is paid by you. The cover is for the bank. If you ever default and the lender sells the property for less than the loan balance, the insurer covers the bank's loss. The insurer can then chase you for that shortfall. So you've paid the premium, the bank is protected, and you carry the residual risk. That's the deal. LMI is not optional once you're above 80% LVR with a mainstream lender. Some non-bank lenders use a Risk Fee instead — same idea, different name, and it's still paid by you. The only way to make it disappear is to not need it.

When LMI kicks in

  • LVR threshold

    80%

    Under 80% LVR — no LMI on any standard loan

  • First step-up

    85%

    Premium is small here — often a few thousand

  • Common ground

    90%

    Most 10% deposit purchases land here

  • Top of band

    95%

    Premium is steep — typically 3–4% of the loan

Indicative LMI premiums — owner-occupied, P&I

Loan amount85% LVR90% LVR95% LVR
$400,000$3,200$7,400$13,800
$500,000$4,100$9,800$18,200
$600,000$5,300$12,400$22,800
$700,000$6,500$15,100$27,800
$800,000$7,800$18,200$33,200
$900,000$9,400$21,800$38,400

Indicative only. Premiums vary by lender, insurer (QBE or Helia mostly), loan term, and whether the premium is capitalised into the loan. Use the LMI calculator for a tighter figure.

Capitalising the premium — and why it costs more than you think

Most lenders let you add the LMI premium on top of the loan rather than paying it at settlement. That's called capitalising. It feels free — no cash out of pocket — but you're now paying interest on the premium for 25 or 30 years. On a $500K loan at 90% LVR, the premium might be around $9,800. Capitalised at 6.0% over 30 years, that single line item costs you closer to $21,000 in total. So if you can pay it up front, pay it up front. If you can't, at least know the real number.

Three legitimate ways to avoid LMI

These are the routes that actually work for most buyers — not gimmicks. Each comes with its own trade-offs.

  • Get to 80% LVR. A 20% deposit plus costs (stamp duty, legals, building & pest) is the cleanest path. If you're close — say 17–18% — sometimes pushing settlement out a quarter to save the rest is cheaper than the premium.
  • Use a guarantor. A parent (or other immediate family) puts up equity in their property as security for the top portion of your loan. The lender treats the combined security as below 80% LVR. Premium = $0. The guarantor's exposure is limited to the guarantee amount and can be released once your LVR drops below 80% organically.
  • Qualify for a professional LMI waiver. Specific occupations — doctors, dentists, vets, lawyers, accountants, mining engineers and a handful of others — can borrow up to 90% (sometimes 95%) LMI-free at certain lenders. Several major banks and second-tier lenders run versions of this — the medical waiver is the strongest. The fine print varies. Membership of the right professional body is usually required.

From the practice

The First Home Guarantee changes the math.

If you're a first-home buyer, the Federal Government's 5% Deposit Scheme can act as a guarantor for up to 15% of the purchase price — meaning you can buy with a 5% deposit and pay no LMI at all. From 1 October 2025 there is no income cap and no annual place cap; the regional property price cap is the binding limit. Worth checking before you pay a premium.

When paying LMI is the right call

It's easy to treat LMI as the villain. It isn't always. For a buyer in a rising market, waiting two years to save another 10% deposit can mean watching the property they wanted go up $80,000. A $15,000 premium to be in the market today is sometimes the cheapest decision you'll make. The question isn't 'should I pay LMI'. It's 'is paying LMI cheaper than waiting'. That answer depends on the suburb, the rate cycle, and your own income trajectory. It's the conversation worth having before you sign anything.

Useful next steps

Questions you might have

The honest answers.

Real numbers · honest answers

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Twenty-minute call. We'll map your deposit, occupation and timing against the lenders most likely to waive or minimise the premium.

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General information only — not personal credit advice. Rates and figures shown are indicative and subject to confirmation against current lender pricing and policy.