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

You've found a place, you've saved a deposit and the lender has quoted LMI on top. Before adding it to the loan, I'd check whether you need to pay it and what it does to your repayments.

Below a 20% deposit, many lenders charge this insurance premium. Paying it can help you buy sooner, but a government scheme, professional waiver or family guarantee might let you buy without it. The useful comparison is what each option costs and how much money you'd have left after the purchase.

Lenders mortgage insurance, usually called LMI, covers the lender if your home loan ends in a loss. You usually pay the premium, but it doesn't cover your repayments if you lose your job or become ill.

It's normally charged once when the loan settles. Depending on the lender, you can pay it from your savings or add it to the loan. I'll explain the cash and repayment difference below.

For a purchase, LMI commonly applies when you borrow more than 80% of the property value the lender accepts. That percentage is your loan to value ratio, or LVR.

The lender may use its valuation, the purchase price or the lower of the two. If its valuation comes in below your agreed price, you may need more cash than you expected, or your LMI quote may change.

It can also apply when you refinance with less than 20% equity. The new lender assesses the loan again, and the insurance you've already paid for doesn't transfer across.

Investment loans can have different premiums and borrowing limits. The property type, location and repayment structure can also affect the quote. I'd check the actual property and loan before treating an estimate as part of your final budget.

There isn't one price every lender charges. The amount you borrow, your deposit, the property and the lender's insurance arrangements all affect the premium.

Start with our LMI calculator. Enter the property value and loan amount to get an estimate. We'll then get the lender's figure for your application and include it in your buying budget.

You also need to allow for duty, conveyancing, inspections and other purchase costs. Our buying-cost guide covers the expenses that sit outside your deposit.

LMI is often priced in bands around borrowing levels such as 85%, 90% and 95%. The cut-offs and premiums vary by lender.

If you're borrowing just over a band, a slightly bigger deposit or a lower purchase price could reduce the insurance cost. Moving from 89.99% to 90.01% of the accepted property value, for example, can cross a pricing boundary.

I'd ask for both quotes before moving more savings into the deposit. A lower premium helps, but you still need money for settlement and the bills that follow.

Some lenders also set the interest rate according to how much of the property's value you're borrowing. When they include LMI in that calculation, adding the premium can push the loan into a more expensive band.

One lender we compared includes financed LMI when choosing the rate tier. That means a 10% deposit can leave you above 90% once the premium is added to the loan.

The following recorded comparison shows why I'd check the premium and rate together.

Comparison dated 9 September 2026, for a home you live in with repayments covering principal and interest, and new property and borrowings of at least $150k. Rates can change. Check ING's current rates and conditions before using them for your budget.

These are standard loan rates. Government guarantee lending has separate arrangements: the scheme removes LMI for an eligible buyer, while the participating lender still sets the rate and assesses the application. Our ING review explains its loan options.

Two lenders can charge different amounts for the same purchase and deposit. Some use Helia or QBE, some have their own insurance arrangements, and some charge a different fee for lending at a higher LVR.

Macquarie, for example, uses a Low Deposit Fee rather than traditional LMI on relevant loans. I'd compare that fee with the competing premium, then check interest rates, ongoing fees and repayments over the same loan term.

A cheaper upfront charge can be outweighed by a higher rate. The loan needs to make sense across the whole comparison.

Some lenders allow this if the total loan remains within their limit. You'll sometimes hear it called capitalising LMI.

You need less cash at settlement, but the loan is bigger. You pay interest on the added premium until that part of the balance is repaid, and it may affect your rate band too.

Ask us to compare paying the premium from savings with adding it to the loan. We'll show you the repayment difference and the cash left after settlement. That makes the decision easier than looking at the premium on its own.

I'd compare buying now with waiting, using the same type of property and a realistic savings target. Neither option is automatically cheaper.

Waiting can work well if you're close to the deposit you need. Buying sooner may suit if the repayments fit, you've kept a cash buffer and the home meets your plans. I wouldn't rely on a prediction that prices will rise to justify a loan that already stretches your budget.

I'd start with the options available using your current savings and circumstances. If none fits, we can compare a larger deposit or family help with paying the premium.

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 qualify with a minimum 2% deposit.

The scheme has no income caps or waitlists. You need a participating lender, an eligible home to live in and a property within the location's price cap. The lender must also approve the loan.

As at September 2026, the cap is $1m for Brisbane, the Gold Coast and Sunshine Coast, and $950k for Melbourne and Geelong. Other areas have different limits, so check the property's postcode using the Government's price-cap information.

Our Westpac review explains how one participating lender offers the scheme alongside its other options for buyers with smaller deposits.

Some lenders waive LMI for eligible borrowers in selected professions. Your job is the starting point; registration, income, employment, loan size and property requirements can also apply.

The conditions vary by lender. For example, ANZ's published list includes chiropractors for eligible lending up to 90% of the property's accepted value. That doesn't mean every chiropractor or every application qualifies. ANZ's professional-waiver factsheet sets out the requirements.

For nurses and pharmacists, I'd check the lender's income and registration requirements before assuming a waiver applies. Our nurse home loan guide and LMI waiver guides explain the options by profession.

A lender may charge a risk fee, insure its own lending or offer a promotion. These options can still involve a higher rate, a different fee or tighter property rules.

I'd compare the complete loan cost before choosing a product because it advertises no LMI. Our lender reviews explain where those differences matter.

Borrowing 80% or less of the lender's accepted value will often avoid LMI, although some properties and loans have stricter rules. Allow for buying costs as well as the deposit.

A cash gift from family may help. The lender can ask for a gift letter and evidence that it doesn't need to be repaid. If you're still borrowing a high share of the property's value, genuine savings rules may also apply.

Before committing all your spare cash, compare the insurance saving with what you'd have left for moving, repairs and emergencies.

A family member may be able to use part of the equity in their property to guarantee your loan. This can reduce or remove LMI and is different from giving you cash for the deposit.

Check exactly how much they're guaranteeing and how the guarantee can be released later. Their property could be at risk if you can't repay, so they should get independent legal and financial advice. Our guarantor loan guide explains the commitment.

Possibly, if you repay and close the loan early. The lender, insurer, timing and policy conditions determine whether there's a refund.

Helia's factsheet outlines partial refunds of 40% when the policy is less than 1 year old and 20% from 1 to 2 years, subject to its conditions. A refund isn't available where you regularly miss payments or default. Your lender needs to confirm whether your policy qualifies and the amount payable.

QBE's guide says some lender arrangements allow a partial refund when the relevant loans are repaid in full and the mortgage is released within 12 months. The lender must notify QBE within 30 days, and other conditions apply.

Ask before paying out or refinancing. Count a refund in your budget only once the lender has confirmed it.

It may, even if you've been making repayments for years. A flat or falling property value can leave you with less than 20% equity when the new lender values the home.

I'd compare any new LMI premium, switching fees and the remaining loan term with the interest saving. Extending the term can also increase total interest despite lower monthly repayments. Our refinancing guide covers the full comparison.

If sale proceeds don't clear the loan and related costs, the unpaid amount is a shortfall. After paying an LMI claim to the lender, the insurer may seek to recover that debt from you.

If you're struggling with repayments, contact your lender's hardship team early. You can also get free financial counselling through the National Debt Helpline. If a sale leaves a debt, ask for a breakdown and get advice about your position.

For a rental property, the ATO treats LMI charged to the borrower as a borrowing expense. If total borrowing expenses exceed $100, the deduction is generally spread over 5 years or the loan term, whichever is shorter.

Repaying early, refinancing or using part of the loan privately can change the treatment. Keep the loan documents and premium statement and ask your accountant how the ATO borrowing-expense rules apply.