LMI

LMI Explained: When Do You Need It and How Much Does It Cost?

Updated May 2026 · 5 min read · Source: APRA, major lenders

Lenders Mortgage Insurance — almost universally called LMI — is one of the most confusing costs in the home-buying process. Many first home buyers are caught off guard by a bill that can range from a few thousand to over $30,000, added to their loan balance with little fanfare. Here's everything you need to know.

What Is LMI?

LMI is insurance that protects the lender — not you — if you default on your home loan and the sale of your property doesn't cover the outstanding debt. Despite being entirely for the lender's benefit, the cost is passed on to the borrower.

It's paid when your deposit is less than 20% of the property's value — i.e. when your Loan-to-Value Ratio (LVR) exceeds 80%.

When Is LMI Required?

Your Deposit	LVR	LMI Required?
20% or more	80% or below	No
15%	85%	Yes
10%	90%	Yes
5%	95%	Yes (some lenders)

How Much Does LMI Cost?

LMI premiums vary by lender and insurer (the two main providers are Genworth and QBE), but as a rough guide:

Property Price	10% Deposit (90% LVR)	15% Deposit (85% LVR)
$500,000	~$7,800	~$3,800
$750,000	~$13,600	~$6,400
$1,000,000	~$21,000	~$9,500

LMI is typically capitalised into your loan — meaning it's added to your loan balance and you pay interest on it over the life of the loan. This increases the true cost significantly.

How to Avoid Paying LMI

Save a 20% deposit — The most straightforward way to avoid LMI entirely.
Use a guarantor — A parent or family member can use equity in their own property to guarantee part of your loan, eliminating LMI without a 20% deposit.
First Home Guarantee Scheme — The federal government guarantees part of your loan, allowing eligible first home buyers to purchase with a 5% deposit and no LMI. Places are limited — check the Housing Australia website for current eligibility.
Professional packages — Some lenders waive LMI for certain professions (doctors, lawyers, accountants, engineers) borrowing up to 90% LVR.

Key insight: Even if paying LMI means you can enter the market sooner, run the numbers carefully. In a rising market, getting in earlier can offset the LMI cost. In a flat or falling market, you may be better off saving longer.

Is LMI Ever Worth Paying?

Sometimes, yes. If property prices in your target area are rising faster than you can save, the capital growth you'd gain by buying earlier can outweigh the LMI premium. However, this calculation depends heavily on market conditions, your financial situation, and how much LMI you'd actually pay.

Use our LMI calculator to model the exact premium for your scenario, then compare it against the cost of waiting longer to save a full 20% deposit.

Calculate Your LMI Premium

Find out exactly how much LMI you'd pay — and whether it's worth it for your situation.

Open LMI Calculator →

⚠️ Disclaimer: LMI premiums vary between lenders and insurers. This guide uses indicative figures only. Always confirm with your lender before committing.