Lenders Mortgage Insurance: What it costs and how to avoid it (2026)

What LMI is (and what it isn’t)

Lenders Mortgage Insurance is one of the most misunderstood costs in Australian property. Let’s be absolutely clear about who it actually protects.

This distinction matters enormously. Many borrowers pay LMI assuming it provides them with some protection, it does not. LMI provides no direct benefit to the borrower; it simply enables the lender to offer higher-LVR loans with reduced risk to itself.

The practical outcome is that LMI lets you access a home loan with a deposit of less than 20%, which would otherwise be unavailable from most lenders. That access has value, but you are paying for it.

When does LMI apply?

LMI applies when the Loan to Value Ratio (LVR) of your loan exceeds 80%. LVR is calculated as:

LVR = Loan Amount ÷ Property Value × 100

Example: if you are buying a $700,000 property and borrowing $595,000, your LVR is 85%. Above the 80% threshold, so LMI applies.

To avoid LMI entirely, you need a deposit of at least 20% of the purchase price plus enough to cover stamp duty, legal fees, and other upfront costs. For a $700,000 property, that means at least $140,000 in deposit plus approximately $30,000 to $40,000 in transaction costs, a total of $170,000 to $180,000+ before you can buy without LMI.

Most lenders set 80% as the standard LMI threshold, but:

• Some lenders charge LMI above a different threshold (e.g. 85%)
• Some professions can access 90%+ lending without LMI (see professional packages below)
• The government’s First Home Guarantee scheme provides an alternative to LMI for eligible buyers

How much does LMI cost?

LMI is calculated as a percentage of the loan amount, and increases significantly as the LVR increases. Indicative figures across loan size and LVR:

Who provides LMI in Australia?

Australia’s LMI market is dominated by two providers:

• Helia(formerly Genworth Australia), one of Australia’s largest LMI providers, used by many major banks and lenders.
• Arch Mortgage Insurance (formerly QBE LMI), the other major provider, used by a range of lenders.

Some lenders self-insure (retain the LMI risk internally) rather than using an external provider. The borrower’s experience is broadly the same, LMI is paid at settlement and the premium is set by the lender.

Capitalising LMI into your loan

Many lenders allow you to add the LMI premium to your home loan balance rather than paying it upfront in cash. This is called “capitalising” the LMI.

The advantage:you don’t need to find the LMI premium in cash at settlement.

The disadvantage: you pay interest on the LMI amount for the life of the loan. A $15,000 LMI premium capitalised into a 6% loan over 30 years will cost you significantly more in total interest, often 2 to 3 times the original premium.

If you can pay the LMI premium from savings rather than capitalising it, you will save money in the long run.

How to avoid LMI

Four practical strategies to skip LMI entirely.

1. Save a 20% deposit

The most straightforward approach. With a genuine 20% deposit (plus costs), no LMI applies. The challenge is that saving a 20% deposit in a rising property market can feel like running on a treadmill, the goalposts keep moving.

2. First Home Guarantee (government scheme)

The federal First Home Guarantee allows eligible first home buyers to purchase with as little as a 5% deposit, with the government guaranteeing up to 15%, eliminating the need for LMI entirely. See our First Home Buyer Guide for details and state-specific price caps.

3. Guarantor loan (family guarantee)

A family member (typically a parent) can act as guarantor, using their own property as additional security for part of your loan. This can allow you to borrow up to 100% of the purchase price without LMI, the lender’s security is effectively supplemented by the guarantor’s property.

Guarantor arrangements carry risk for the guarantor, they are liable for the guaranteed portion of the loan if you default. All parties should obtain independent legal and financial advice before entering a guarantor arrangement.

4. Professional package (LMI waiver)

Many lenders offer LMI waivers for borrowers in certain professions, recognising their lower risk of default (stable employment, high income). Eligible professions typically include:

• Medical doctors, specialists, and dentists
• Lawyers and barristers
• Accountants (CPA or CA qualified)
• Optometrists and veterinarians
• Some engineers and other professionals (lender-dependent)

Waivers typically allow borrowing up to 90 to 95% LVR without LMI. Eligibility requirements vary by lender, check with your mortgage broker for current options.

Is paying LMI ever worth it?

The conventional wisdom is that LMI is a cost to be avoided. There is a genuine argument that paying LMI can sometimes be worth it.

Consider a buyer with a 10% deposit ($80,000) looking at an $800,000 property. They could either:

• Wait two more years to save the full 20% deposit. During that time, the property market might rise, say 5% per year. The same $800,000 property could now cost $882,000, requiring a higher deposit. The cost of waiting is potentially the additional $82,000 plus $82,000 more in stamp duty and ongoing costs.
• Buy now with 10% deposit and pay around $18,000 LMI. Enter the market two years earlier, benefit from any capital growth, and pay off LMI over time.

In a rising market, getting in two years earlier can easily outweigh the cost of LMI. In a flat or falling market, waiting to save a larger deposit is almost always better. The calculation depends on:

• Expected property price growth in your target area
• Your ability to save, how quickly could you reach a 20% deposit?
• Your current rental costs (which are dead money vs building equity in a purchased property)
• The specific LMI premium for your LVR and loan amount

Use our borrowing power calculator to model different scenarios and see what makes sense for your situation.