Quick answer: lenders mortgage insurance (LMI) is a one-off premium most lenders charge when you borrow more than 80% of the property’s value. You pay it, but it protects the lender, not you. It can often be added to the loan. You may be able to avoid it with a 20% deposit, the 5% Deposit Scheme, a family guarantee or a professional LMI waiver.
LMI is one of the biggest costs first home buyers don’t see coming. It’s also one of the most avoidable, if you know the options before you choose a lender.
What LMI is, and who it protects
When you borrow a high share of a property’s value, the lender takes more risk. LMI is insurance the lender takes out against that risk: if you couldn’t repay and the sale didn’t cover the debt, the insurer pays the lender. You pay the premium, but the lender is the one insured. It doesn’t cover your repayments if you lose your job or get sick.
When you pay it
Most lenders charge LMI when the loan is more than 80% of the property’s value (the loan-to-value ratio, or LVR). The value is the lender’s valuation or the price, whichever is lower, so a low valuation can push you over 80% unexpectedly.
Roughly what it costs
LMI is priced by the lender’s insurer and depends on the loan size, the LVR and sometimes whether you’re a first home buyer. As a rough guide only, premiums as a share of the loan:
| Borrowing | Rough premium range |
|---|---|
| Up to 80% of the value | Usually no LMI |
| About 85% | Around 1% of the loan |
| About 90% | Around 2% of the loan |
| About 95% | Often 3.5% to 4.5%+ of the loan: roughly $26,000 to $34,000 or more on a $760,000 loan (an $800,000 home with a 5% deposit) |
Some states also charge stamp duty on the premium. Actual premiums vary between lenders, so get a quote for your exact loan before you decide.
Five ways to avoid LMI
- Save a 20% deposit. The simplest, but in Sydney it can take years, and prices can move while you save.
- Use the 5% Deposit Scheme. Eligible first home buyers can buy with a 5% deposit and no LMI, because the Government guarantees part of the loan. Since October 2025 there are no income caps, and the Sydney price cap is $1.5 million. How the 5% Deposit Scheme works.
- A family guarantee. A parent uses equity in their home as extra security, which can remove the need for LMI. How guarantor loans work.
- A professional LMI waiver. Some lenders waive LMI for eligible professions such as doctors, nurses, accountants and lawyers, often up to 90% or more. Who qualifies.
- Borrow a little less. Dropping from 81% to 80% can remove LMI completely. Sometimes a slightly cheaper property or a small family gift is enough.
Is paying LMI ever worth it?
Sometimes. If saving the extra deposit would take years and prices or rents are rising, paying LMI to buy sooner can work out. It’s a trade-off: the premium, often added to the loan with interest on top, against the cost of waiting. We run both scenarios before you decide.
Refinancing above 80%?
LMI usually doesn’t transfer between lenders. If your loan is above 80% of the property’s value, refinancing can mean paying LMI again, which can wipe out the saving from a lower rate. Check your LVR before switching. Our refinance calculator shows your LVR band.
Common questions
When do I have to pay LMI?
Usually when you borrow more than 80% of the property’s value. Below 80%, most lenders don’t charge it. Some borrowers can avoid it above 80% through the 5% Deposit Scheme, a family guarantee or a professional LMI waiver.
How much is LMI?
It depends on the loan size, how much of the value you’re borrowing, the lender and its insurer. As a rough guide it can be around 1% of the loan at 85%, rising to several per cent at 95%, which on a large Sydney loan can mean tens of thousands of dollars. Get a quote for your exact loan.
Does LMI protect me?
No. It protects the lender if you can’t repay and the property sells for less than the debt. You pay the premium, but the lender is the insured party.
Can I add LMI to my loan?
Usually, yes. Many lenders let you add the premium to the loan instead of paying cash, but then you pay interest on it for the life of the loan, and the higher balance must still be within the lender’s limits.
Do I pay LMI again if I refinance?
If you refinance above 80% of the property’s value, the new lender will usually charge a new LMI premium. LMI generally doesn’t transfer between lenders, and refunds are usually limited or nil.
General information only, not financial or credit advice. LMI premium ranges are rough guides; actual premiums depend on the lender, insurer, loan size, LVR and your circumstances. Scheme and waiver eligibility rules apply.
