lenders mortgage insurance.
A one off premium paid by the borrower when you have less than 20% deposit.
what is LMI?
Lenders Mortgage Insurance is a fantastic opportunity for borrowers who have less than a 20% deposit. By borrowing over 80% of a property's value, you can jump into the property market sooner than you think! While this one-off premium comes at a cost and protects the lender in case of loan repayment issues, it opens the door to your homeownership dreams with a smaller deposit—what a win!
when is LMI required?
- When your Loan-to-Value Ratio (LVR) is above 80%.
- You are applying for a home loan with a deposit of under 20%.
- You do not qualify for LMI waivers, such as those for specific professions or government initiatives.
- You lack a guarantor for your loan.
However, some lenders are ready to offer LMI waivers or discounts for: - Medical, legal, or accounting professionals.
- First Home Buyers or Government Guarantee Programs.
- Individuals with strong income and asset positions.
- Guarantor loans.
is LMI avoidable?
Absolutely by:
- Saving a 20% deposit
- Using a guarantor
- Qualifying for LMI waivers through your profession
- Government schemes
how much does it cost?
LMI is calculated as a percentage of your loan amount and increases as your deposit decreases.
For example:
- $800,000 loan at 90% LVR → LMI could be approx. $13,000–$18,000
- $800,000 loan at 95% LVR → LMI could exceed $27,000
This can be paid upfront or added to your loan amount (capitalised)
good & bad of LMI.
Good
- Buy sooner with a tiny deposit
- Get in the market whilst prices are rising
- Access better suburbs or property types
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Bad
- Tens of thousands of extra costs
- The added cost protects the lender not the borrower
- Non refundable if you refinance or repay the loan quicker