Lenders mortgage insurance is a one-off premium charged when your deposit is less than 20% of the property's value. It's one of the most misunderstood costs in home buying.
Who it protects
LMI protects the lender if you can't repay and the sale of the property doesn't cover the debt. You still owe the lender, and the insurer can pursue you for the shortfall.
How much it costs
The premium depends on the loan amount and the loan-to-value ratio (LVR). The higher the LVR, the higher the premium. On Sydney purchases with a 5–10% deposit, it can easily be tens of thousands of dollars. Many lenders let you add it to the loan, but then you pay interest on it too.
Legitimate ways to avoid LMI
- Save a 20% deposit. The simplest, but slowest, option.
- The 5% Deposit Scheme. Eligible buyers pay no LMI with a 5% deposit. See our 5% Deposit Scheme guide.
- A family guarantee. A parent's equity replaces the missing deposit. See family guarantee home loans.
- Professional waivers. Some lenders waive or reduce LMI for certain professions, such as some medical, legal and accounting professionals.
When paying LMI makes sense
If prices are rising faster than you can save, paying LMI to buy two years earlier can work out better than waiting. There's no universal answer; we run the numbers both ways with you.
LMI and refinancing
If you refinance while your loan is still above 80% LVR, you may have to pay LMI again with the new lender. That's worth checking before refinancing.
See if you can avoid LMI
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