What is lenders mortgage insurance (LMI)?

LMI is insurance that protects the lender (not you) if you default on your home loan. It is typically required when your deposit is less than 20% of the purchase price, meaning your loan-to-value ratio (LVR) exceeds 80%.

How much does LMI cost?

LMI premiums depend on the loan amount and LVR. For a $900,000 property with a 10% deposit, LMI can range from $15,000 to $30,000+. The premium is usually a one-off cost that can be added to the loan.

How do I avoid paying LMI?

The simplest way to avoid LMI is to save a 20% deposit. Some buyers also use a family guarantee (where parents use equity in their home as additional security) to reduce the LVR below 80% without the full deposit.

Can LMI be added to the loan?

Yes, most lenders allow you to capitalise LMI into the loan. This means you pay interest on it over the life of the loan, which increases your total repayment. It does reduce the upfront cash needed at settlement.

Calculator

LMI calculator

Estimate your lenders mortgage insurance (LMI) premium. Adjust the deposit slider to see how much extra deposit avoids LMI entirely.

Purchase priceDeposit: 10% ($90,000)

5%25%

Loan amount

$810,000

LVR

90.0%

Estimated LMI premium

$17,820

To avoid LMI, increase your deposit by $90,000 to reach 20%.

Indicative estimate based on conservative mid-market rates. Actual premiums vary by lender and insurer. Contact your lender for an exact quote.

How LMI works

Lenders mortgage insurance is a one-off premium charged when your home loan exceeds 80% of the property value (loan-to-value ratio above 80%). It protects the lender, not the borrower. The premium is calculated based on the loan amount and the LVR band. Higher LVRs attract significantly higher premiums. Most lenders allow you to add the LMI cost to the loan, but this increases your total repayments.

Frequently asked questions

What is lenders mortgage insurance (LMI)?: LMI is insurance that protects the lender (not you) if you default on your home loan. It is typically required when your deposit is less than 20% of the purchase price, meaning your loan-to-value ratio (LVR) exceeds 80%.
How much does LMI cost?: LMI premiums depend on the loan amount and LVR. For a $900,000 property with a 10% deposit, LMI can range from $15,000 to $30,000+. The premium is usually a one-off cost that can be added to the loan.
How do I avoid paying LMI?: The simplest way to avoid LMI is to save a 20% deposit. Some buyers also use a family guarantee (where parents use equity in their home as additional security) to reduce the LVR below 80% without the full deposit.
Can LMI be added to the loan?: Yes, most lenders allow you to capitalise LMI into the loan. This means you pay interest on it over the life of the loan, which increases your total repayment. It does reduce the upfront cash needed at settlement.