Lenders Mortgage Insurance (LMI) in Australia: Complete Guide

Lenders Mortgage Insurance is an insurance policy taken out by the lender (not the borrower) that protects the lender if the borrower defaults and the property is sold for less than the outstanding loan balance.

Despite protecting the lender, the borrower pays the premium. This seems counterintuitive — you're paying insurance for someone else's benefit. The logic from a lender's perspective is that LMI allows them to lend to borrowers with smaller deposits who they would otherwise reject, thereby expanding access to homeownership.

LMI is one-off and is calculated at settlement. It's typically capitalised (added to the loan amount) rather than paid upfront — which means you also pay interest on the LMI premium for the life of the loan, making the real cost higher than the headline premium suggests.

LMI premiums are based on the loan amount and LVR. The higher your LVR (the less deposit you have), the more expensive LMI becomes.

Indicative LMI premiums (vary by lender and state stamp duty on LMI):

AU$700,000 loan, 90% LVR (10% deposit): LMI approximately AU$17,000–AU$23,000 AU$700,000 loan, 85% LVR (15% deposit): LMI approximately AU$9,000–AU$12,000 AU$700,000 loan, 80% LVR (20% deposit): AU$0 — LMI not required

Note that some states (QLD, NSW, ACT) charge stamp duty on the LMI premium itself, adding a further cost. The LMI premium is also added to your loan, so you pay interest on it for potentially 30 years — meaning the true cost is considerably higher than the upfront premium.

Several Australian government schemes allow eligible buyers to purchase with a smaller deposit without paying LMI:

First Home Guarantee (FHBG): The government guarantees up to 15% of the property purchase price, allowing eligible first home buyers to purchase with as little as 5% deposit. Only 50,000 places are available each year — apply early.

Regional First Home Buyer Guarantee: Similar scheme specifically for buyers purchasing in regional areas, with its own allocation of places.

Family Home Guarantee: Allows eligible single parents with at least one dependent child to purchase with a 2% deposit, with the government guaranteeing up to 18%.

State-based schemes: Most states have additional first home buyer assistance — check your state's Revenue Office for current offers, which change frequently.

Some lenders offer LMI waivers or reduced LMI for specific professional categories, typically including medical professionals (doctors, dentists, veterinarians), lawyers, accountants, and sometimes engineers and pharmacists.

These professionals are considered low default risk. Through specialist lenders and mortgage brokers, they can often borrow up to 90% LVR without LMI, and in some cases up to 95% LVR.

If you work in an eligible profession, a specialist mortgage broker can help you identify lenders offering LMI waivers. This can save AU$20,000–AU$40,000 on a high-value property purchase.