LMI Explained — Lenders Mortgage Insurance in Australia (2026)
Lenders mortgage insurance (LMI) is a significant cost that catches many first home buyers off guard. On a $700,000 purchase with a 10% deposit, LMI can add $10,000–$15,000 to your costs. Despite the name, LMI protects the lender — not you.
Here is everything you need to know about LMI: what it is, when it applies, how much it costs, and how to avoid or reduce it.
What Is LMI?
LMI is an insurance policy that protects the lender (bank or non-bank) if you default on your home loan and the sale of the property does not cover the outstanding loan balance.
Key facts:
- LMI protects the lender, not the borrower
- You pay the premium — your lender takes out the policy
- LMI applies when your deposit is less than 20% of the property value
- LMI does not cover you for repayment difficulties — that is income protection or mortgage protection insurance
When Does LMI Apply?
LMI is required when the loan-to-value ratio (LVR) exceeds 80%.
LVR = Loan amount ÷ Property value × 100
| Deposit | LVR | LMI Required? |
|---|---|---|
| 20% or more | ≤80% | No |
| 15% | 85% | Yes |
| 10% | 90% | Yes |
| 8% | 92% | Yes |
| 5% | 95% | Yes |
A 20% deposit on a $700,000 property = $140,000. Anything below $140,000 deposit = LMI applies.
How Much Does LMI Cost?
LMI premium depends on the LVR and loan size. Higher LVR = higher premium (as a percentage of the loan). The two main LMI providers in Australia are QBE and Helia (formerly Genworth).
Indicative LMI premium rates (approximate — lender and insurer apply their own schedules):
| LVR | LMI Rate (% of Loan) | LMI on $500k Loan | LMI on $700k Loan |
|---|---|---|---|
| 85.01–90% | ~1.5–1.8% | ~$7,500–$9,000 | ~$10,500–$12,600 |
| 90.01–92% | ~2.5–3.0% | ~$12,500–$15,000 | ~$17,500–$21,000 |
| 92.01–95% | ~3.5–4.5% | ~$17,500–$22,500 | ~$24,500–$31,500 |
These are indicative ranges only. Actual LMI is calculated by the specific LMI insurer (Helia or QBE) based on the lender’s pricing schedule. The lender provides the exact LMI amount in your loan approval.
LMI Stamp Duty
LMI premiums attract stamp duty in most Australian states (typically 9–11% of the premium):
| LMI Premium | Stamp Duty on LMI (10%) | Total LMI Cost |
|---|---|---|
| $8,000 | $800 | $8,800 |
| $12,000 | $1,200 | $13,200 |
| $20,000 | $2,000 | $22,000 |
How Is LMI Paid?
Option 1: Capitalised (added to loan) Most borrowers add LMI to their loan balance. The upfront cash requirement is lower, but you pay interest on the LMI amount for the life of the loan.
Example: $630,000 loan (90% LVR on $700,000) + $12,000 LMI + $1,200 LMI stamp duty = $643,200 loan balance
Option 2: Paid upfront Some lenders allow LMI to be paid at settlement. This avoids paying interest on LMI but increases the upfront cash required.
Ways to Avoid or Reduce LMI
1. Save a 20% Deposit
The most direct route. At 20% deposit, LMI does not apply.
2. Family Guarantee (Guarantor Loan)
A parent or close family member can provide security over their own property to supplement your deposit — effectively reducing your LVR below 80% without a 20% cash deposit.
Risk: The guarantor’s property is at risk if you default. This is a significant financial commitment for the guarantor.
3. Home Guarantee Scheme (First Home Guarantee)
The federal government’s First Home Guarantee allows eligible first home buyers to purchase with a 5% deposit without LMI — the government guarantees the remaining 15% to the lender.
Eligibility criteria apply (income caps, property price caps, first home buyer status). Places are limited each financial year.
→ See Home Guarantee Scheme Guide
4. Some Professions Are LMI-Exempt
Certain professions — typically doctors, dentists, lawyers, accountants and some other high-income professionals — may qualify for LMI waiver at certain lenders, even with less than 20% deposit. Lenders use their own approved profession lists and loan size limits.
5. Lender-Specific LMI Waivers
A small number of lenders (mainly credit unions and some regional banks) offer LMI waiver products for members or specific purchaser profiles. Check with individual lenders.
Is LMI Worth Paying?
This is one of the most common questions for first home buyers. The answer depends on your personal circumstances.
Reasons LMI may be worth paying:
- Property prices in your target area are rising faster than you can save
- Rent is high relative to savings capacity
- You have stable, growing income and can service the higher loan
- The stamp duty savings from buying now (as a FHB) outweigh LMI costs
Reasons to wait and save:
- You can save a 20% deposit within 12–18 months without sacrificing affordability
- Property prices in your area appear stable or declining
- LMI costs are high relative to the loan size
- You have concerns about job security
This is a significant financial decision. Both paths involve trade-offs. The right answer depends on your income trajectory, local property market conditions and personal risk tolerance. This is general information only.
LMI Is Not Mortgage Protection Insurance
A common point of confusion:
| LMI | Mortgage Protection Insurance | |
|---|---|---|
| Protects | The lender | You (the borrower) |
| What it covers | Lender’s loss if you default | Your repayments if you can’t work |
| Who pays | You | You |
| When it applies | At loan origination | If you lose income, die or become disabled |
→ See Mortgage Insurance vs Life Insurance
Frequently Asked Questions
Can I get LMI refunded if I pay down my loan? Generally no — LMI premiums are non-refundable once paid. If you refinance to a new lender (and your LVR is now below 80%), you don’t pay LMI again. If you refinance with LVR still above 80%, the new lender may require a new LMI policy.
Do all lenders use the same LMI insurer? No — lenders use either Helia (formerly Genworth) or QBE. The LMI premium varies slightly between insurers and is quoted by the lender in your loan approval.
Is LMI tax deductible? For owner-occupiers: LMI is generally not directly deductible as a personal expense. For investment properties: LMI may be deductible over 5 years or the loan term (whichever is shorter) as a borrowing cost — consult a tax agent.
Related Guides
- LMI Providers — QBE vs Helia
- Total Cost of Buying a House
- Home Guarantee Scheme Explained
- How Much Deposit Do I Need?
- Costs and Fees Hub
This article provides general information about lenders mortgage insurance. LMI rates vary by lender, LMI provider and loan characteristics. For advice tailored to your situation, speak with a licensed mortgage broker or financial adviser. Find one through MoneySmart.