Lenders Mortgage Insurance (LMI): Cost and How It Works

Lenders Mortgage Insurance, usually called LMI, can add thousands or even tens of thousands of dollars to the cost of buying a home. But it may also help you buy sooner without waiting until you have a 20% deposit.

Before you pay LMI, compare buying now with waiting to save a bigger deposit. We'll also check whether you can avoid it through a waiver, the Government Scheme or a guarantor.

You usually pay the LMI premium, but the policy covers your lender. If the lender claims after selling your home, the insurer may still ask you to repay the amount left owing.

For a purchase, you may need LMI if your loan is more than 80% of the value the lender accepts. That may be the purchase price, its valuation or the lower of the two.

It can also come up when refinancing. If you have less than 20% equity, the new lender may require a fresh premium even if you paid LMI when you bought. Your old policy does not move across with the loan.

Investment loans can have different premiums and limits. Property type, location, loan purpose and repayment structure can also affect what is available, so an online estimate is only a starting point.

There is no single LMI price list. Your loan amount, deposit, property and lender can all affect the premium. Investment loans may have different pricing too.

LMI is usually a one-off premium charged at settlement. You may pay it from your savings or add it to the home loan if the lender allows it.

Use our LMI calculator for an estimate, then ask for a written lender quote before you sign a contract. Add it to your deposit and other buying costs to work out how much cash you'll need.

LMI is commonly priced in bands around borrowing levels such as 85%, 90% and 95%, although the exact cut-offs and premiums vary. If a loan moves from 89.99% of the lender's accepted property value to 90.01%, it can cross into the next band and cost noticeably more.

If you are close to a cut-off, a slightly bigger deposit or lower purchase price could reduce your LMI bill. Do not empty your emergency savings just to reach a band. Compare the premium, repayments and money left after settlement first.

LMI is not the only extra cost to check. Lenders often charge a higher interest rate when you're borrowing a larger share of the property's value.

On 9 September 2026, ING's Mortgage Simplifier rate was 6.04% for an owner-occupier repaying both the loan and interest at 70.01–80% of the property value. It was 6.24% at 80.01–90% and 6.69% at 90.01–95%. The rates shown apply to new property and borrowings of at least $150k.

ING counts any LMI you add to the loan when it works out your rate band. That means a 10% deposit can still leave you borrowing more than 90% once LMI is added. The difference between the 6.04% and 6.69% rates is 0.65 percentage points. Check ING's current rates for any changes.

These are ING's standard rates, not Government 5% Deposit Scheme pricing. The Scheme removes LMI for an eligible buyer, but the participating lender still sets the rate and assesses the loan. Our ING home loan review explains where ING fits and when you may need another lender.

Two lenders can charge different upfront costs for the same loan and deposit. Some use Helia or QBE, some have their own insurance arrangements, and others charge a lender risk fee instead of LMI.

In this comparison prepared on 9 September 2026, upfront costs ranged from about $10.4k to $11.4k. That's a difference of about $971 for the same borrowing scenario. Macquarie's amount is a low-deposit fee.

The lowest upfront cost won't necessarily give you the cheapest loan. We also compare the interest rate and ongoing fees for the loan you're considering.

Some lenders let you add LMI to the loan, as long as the total stays within their limit. This is often called capitalising the LMI.

You need less cash upfront, but your loan is bigger and you pay interest on the added amount until you repay it. Check how much that changes your repayments and total interest.

There is no rule that says waiting for a 20% deposit is always better. Saving longer may avoid the premium and reduce the loan, but property prices, rent and your own plans can change while you wait. Paying LMI may get you into a suitable home sooner, but you take on a larger debt and start with less equity.

Borrowing 80% or less of the lender's accepted property value will often avoid LMI. You still need enough cash for purchase costs, and some loans or properties can have stricter rules.

A non-repayable cash gift from parents or family can also help you reach the deposit. This is different from a guarantor loan because the family gives you money rather than securing part of your debt. The lender may ask for a gift letter and evidence the money does not need to be repaid. If you are still borrowing a high percentage of the property value, its genuine savings rules can still apply.

Eligible first home buyers can use the Australian Government 5% Deposit Scheme with a minimum 5% deposit and no LMI. Eligible single parents and legal guardians may be able to buy with a minimum 2% deposit.

From 1 October 2025, the scheme has no income caps or waitlists. The property price cap is now one of the main checks. As at 9 September 2026, the cap for Queensland's capital-city and named regional-centre areas, covering Brisbane, Gold Coast and Sunshine Coast, is $1m. The equivalent Victorian cap, covering Melbourne and Geelong, is $950k. Other areas have different caps.

You still need to use a participating lender, buy an eligible owner-occupied property within the cap and pass the lender's approval process. Our Westpac home loan review shows how one participating lender handles the scheme alongside its other small-deposit options.

Some lenders let a family member use part of the equity in their property to guarantee your loan. This may reduce or remove the LMI cost. It is different from your parents giving you cash or lending you the deposit.

Check exactly how much of your loan your family member would be guaranteeing. Their property could be at risk if you cannot repay, so they should get independent legal and financial advice. Our guarantor home loan guide explains how it works.

Some lenders waive LMI for eligible borrowers in selected professions. Your job is the starting point. Your registration, income, employment, property and loan amount also matter.

For example, CBA may waive LMI for an eligible pharmacist earning at least $100k a year from that work. A registered nurse or midwife may qualify with a 10% deposit at Westpac if they earn at least $90k. Our nurse home loan guide covers the nursing options. ANZ can cover an eligible chiropractor borrowing up to 90%.

See our LMI waiver guides to check your profession and the conditions. You'll still want a lender whose borrowing amount, rate, fees and features suit you.

A lender may use a fee other than traditional LMI, self-insure the risk or offer a limited promotion. These options can still cost more through a fee, higher rate or tighter rules. Our Australian lender reviews explain where these differences can matter. Compare the total loan cost and do not assume 'no LMI' means 'no extra cost'.

An LMI refund is not automatic. Whether any premium can be refunded depends on the lender, insurer, when the loan is repaid and the conditions of the policy. Helia says a partial refund may apply when an insured loan is discharged within the first 2 years, subject to conditions. QBE says a partial refund may apply under some lender arrangements when a loan is discharged within 12 months.

Ask your lender directly before paying out or refinancing. Get the answer in writing and include any refund in the switching calculation only after it is confirmed.

If your property value has stayed flat or fallen, you may still have less than 20% equity even after making repayments for years. Moving to a lower rate could trigger a brand-new LMI bill that wipes out the interest saving. Ask the new lender for its valuation and written LMI quote, then compare the new rate, fees, discharge costs, loan term and any confirmed refund. Our refinancing guide covers the wider comparison.

If repayments fall behind, contact the lender early and ask for its hardship team. A forced sale is usually the end of a longer process, not the first step. Free financial counselling is also available through the National Debt Helpline.

If the property is eventually sold and the net sale proceeds do not clear the loan and related costs, there can be a shortfall. The lender may claim under its LMI policy. The insurer can then seek to recover that debt from you, depending on the circumstances. LMI does not wipe the debt for the borrower.

Here, $855k minus $800k leaves a $55k shortfall. Extra unpaid interest, legal fees or recovery costs may increase what you owe. Ask the lender or insurer for a breakdown, and get legal advice or help from a free financial counsellor.

The ATO treats LMI charged to a borrower for a rental property as a borrowing expense. If your total borrowing expenses are more than $100, the deduction is generally spread over 5 years or the term of the loan, whichever is shorter.

The deduction can change if the loan is repaid early, refinanced or used partly for private purposes. Keep the loan documents and premium statement, and ask your accountant how the rule applies to your property.

Bring us your property budget, savings, income and other debts before you commit. We'll help you compare the upfront cost and repayments so you can buy without leaving yourself stretched.