Lenders Mortgage Insurance is one of the most frustrating costs in Australian property. It can add $10,000 to $30,000 or more to your home purchase — and unlike other insurance, it protects the lender, not you. Yet for many buyers without a 20% deposit, it's unavoidable.
This guide explains exactly what LMI is, when it triggers, how much it actually costs at different loan-to-value ratios, whether capitalising it makes sense, and — most importantly — the five legitimate ways to avoid paying it altogether.
LMI is an insurance policy that protects the lender (your bank) — not you — in the event that you default on your home loan and the sale of the property doesn't cover the outstanding loan balance.
When property values fall and a borrower defaults, the bank may recover less from the forced sale than what's owed. LMI covers that shortfall. The insurer pays the bank, and then the insurer can pursue you for the debt.
Despite being for the lender's benefit, the cost is always passed on to the borrower. It's a one-off premium paid at settlement — either upfront in cash or capitalised (added) onto your loan balance.
LMI is triggered when your Loan-to-Value Ratio (LVR) exceeds 80% — meaning your deposit is less than 20% of the purchase price.
LVR is calculated as:
LVR = Loan Amount ÷ Property Value × 100
For example: if you're buying a $700,000 property and borrowing $600,000, your LVR is 85.7% — which means LMI applies.
| Property Price | 20% Deposit Required | Maximum Loan (No LMI) |
|---|---|---|
| $500,000 | $100,000 | $400,000 |
| $700,000 | $140,000 | $560,000 |
| $900,000 | $180,000 | $720,000 |
| $1,200,000 | $240,000 | $960,000 |
Note: LMI applies to the loan itself, not the property price. If you have a guarantor covering part of the loan (see below), LMI may not apply even with a smaller deposit.
LMI premiums are calculated as a percentage of the loan amount. The higher your LVR, the higher the premium percentage. Premiums also vary slightly between the two main LMI providers in Australia: Helia (formerly Genworth) and QBE LMI.
Here are approximate LMI costs at common price points and LVRs:
| Property Price | Deposit | LVR | Approx. LMI Premium |
|---|---|---|---|
| $600,000 | $60,000 (10%) | 90% | ~$11,400 |
| $600,000 | $90,000 (15%) | 85% | ~$7,200 |
| $800,000 | $80,000 (10%) | 90% | ~$15,200 |
| $800,000 | $120,000 (15%) | 85% | ~$9,600 |
| $1,000,000 | $100,000 (10%) | 90% | ~$19,000 |
| $1,000,000 | $150,000 (15%) | 85% | ~$12,000 |
These are indicative estimates only. Actual premiums vary by lender, LMI provider, loan type, and property location. Use our LMI calculator for a precise estimate.
LMI is also subject to stamp duty in most states, which adds a further 6–11% to the premium cost depending on your state. This is often overlooked in budget calculations.
Most lenders allow you to capitalise (add) the LMI premium onto your loan balance rather than paying it upfront. On a $12,000 LMI premium over a 30-year loan at 6%, the total cost of capitalising is significantly higher than paying upfront — the interest on that $12,000 over 30 years adds several thousand dollars more.
However, capitalising makes sense if:
If you're unsure, run the numbers with a mortgage broker before deciding.
The most straightforward method. With an LVR of 80% or below, LMI is not required. On a $700,000 property, this means saving $140,000 — which for many buyers is a multi-year project, but the savings are significant.
A family member (usually a parent) offers their own property as additional security for your loan. This reduces the effective LVR below 80%, eliminating LMI — even if your cash deposit is small. The guarantor doesn't need to make repayments, but their property is at risk if you default. The guarantee can typically be released once you've built enough equity in your own property.
The Australian Government's First Home Guarantee (formerly FHLDS) allows eligible first home buyers to purchase with as little as a 5% deposit without paying LMI. The government guarantees 15% of the loan to the lender, removing the need for LMI.
Key details for 2025–26:
Demand for these places has been very high — apply early in the financial year through a participating lender.
Some lenders waive LMI for borrowers in specific professions — typically doctors, dentists, specialists, lawyers, accountants, and veterinarians — who demonstrate stable high incomes. Each lender has its own criteria. LVRs up to 90% or even 95% may be allowed without LMI for qualifying professionals.
Some lenders periodically offer LMI waivers for borrowers meeting specific criteria — such as new-to-bank customers, borrowers with certain employers, or those in specified postcodes. These deals change frequently. A mortgage broker will know which lenders are currently offering LMI waivers and whether you qualify.
Amy wants to buy a $650,000 property in Brisbane. She has $32,500 saved (5% deposit).
Without the First Home Guarantee: LMI would be approximately $14,000–$16,000, adding significantly to her upfront costs.
With the First Home Guarantee: Amy purchases with 5% deposit, the government guarantees 15%, and Amy pays $0 LMI.
Amy's purchase price ($650,000) is under the Brisbane cap ($700,000), and her income is under $125,000 — so she qualifies. She contacts a participating lender in July and secures a place.
These two products are frequently confused but are completely different:
| LMI | Mortgage Protection Insurance | |
|---|---|---|
| Who it protects | The lender (bank) | You (the borrower) |
| Who pays | You | You |
| When it pays out | You default and the sale doesn't cover the loan | You lose income (illness, injury, redundancy) |
| Optional? | No (if LVR >80%) | Yes — entirely your choice |
Mortgage protection insurance is a separate, optional product that covers your repayments if you can't work. It's worth considering for borrowers with limited savings buffers, sole income earners, or those in higher-risk employment situations.
Despite the bad reputation, there are genuine situations where paying LMI makes financial sense:
The maths depends heavily on your market, your loan rate, and how quickly property prices move. Model it carefully before assuming LMI is always the enemy.
Enter your property price and deposit to see your estimated LMI premium.
Open Free LMI Calculator →LMI premiums are generally not transferable or refundable when you refinance. If you move to a new lender, you may need to pay a new LMI premium — unless your LVR has dropped below 80% through loan repayments or property value growth.
In most cases, no. LMI is specific to the loan and lender it was taken out with. Switching lenders typically requires a new LMI assessment. Some lenders have arrangements with the same LMI provider that allow a partial credit, but this is the exception rather than the rule.
For investment properties, LMI may be tax-deductible — but it's deducted over 5 years (or the loan term if shorter), not all in the year it's paid. For owner-occupiers, LMI is not deductible. Always confirm with your tax agent.
Most lenders will lend up to 95% LVR (5% deposit) with LMI. Some lenders offer 98% with LMI for certain borrowers, though this is rare. The First Home Guarantee allows 5% deposit without LMI for eligible first home buyers.
Yes. LMI applies to both owner-occupier and investment property loans when the LVR exceeds 80%. Many lenders are more conservative with investment lending and may cap LVR at 90% (rather than 95%) for investment purposes.
Mike Backman — Founder of Aussie Property & Crypto Calc. Mike researches Australian property, taxation and personal finance and maintains all calculators using ATO, ASIC, RBA and state government data.
Last updated: 19 July 2026 · About this site · Report an error