What Is LMI and
How to Avoid It?
What Lenders Mortgage Insurance is, what it costs, and practical strategies for avoiding it.
What is Lenders Mortgage Insurance? LMI is a one-off insurance premium you pay when your deposit is less than 20 per cent of the property value. It protects the lender (not you) against the risk of you defaulting. LMI can cost several thousand to tens of thousands of dollars depending on the loan amount and LVR. It is usually added to the loan balance.
How LMI is calculated
LMI cost depends on two factors: the loan amount and the loan-to-value ratio (LVR). The higher the LVR (the smaller your deposit), the higher the LMI premium. On a $500,000 property with a 10 per cent deposit ($50,000), LMI could cost approximately $8,000 to $12,000. With a 15 per cent deposit, it might be $3,000 to $5,000. At 20 per cent or more, no LMI is required.
How to avoid LMI
- Save a 20 per cent deposit — the straightforward way. For a $500,000 property, that means $100,000
- Home Guarantee Scheme — eligible first home buyers can purchase with as little as 5 per cent deposit and no LMI. The government guarantees the gap. Read our Home Guarantee Scheme guide
- Family guarantee — a family member uses equity in their property to guarantee part of your loan, allowing you to avoid LMI without a full 20 per cent deposit
- Lender-paid LMI — some lenders absorb the LMI cost for certain products, usually in exchange for a slightly higher interest rate
Read our full guide to how home loans work for the complete picture on deposits, features, and the application process.
Want to know your LMI options?
Book a free consultationFrequently asked questions
Find the right loan for you.
Free consultation. No obligation. We'll come to you — day, evening, or weekend.
Book a free consultation