What Is Lenders Mortgage Insurance (LMI)?

Updated 31 Aug 2025 · 5–7 min read

Lenders Mortgage Insurance (LMI) is an insurance premium you pay when your deposit is usually less than 20% (your LVR is above 80%). It protects the lender — not you — if you can’t repay the loan.

When Does LMI Apply?

Most commonly when LVR > 80% (deposit < 20%).
Some professions and first-home buyer schemes may have exceptions or lower LMI.
LMI can sometimes be capitalised onto your loan (added on top) if allowed by the lender.

How Much Does LMI Cost?

LMI cost depends on loan size, LVR and lender’s insurer. A <10% deposit can add thousands to the upfront cost. Our calculators include an approximate LMI when deposit is below 20%.

Pros & Cons of Paying LMI

Pros

Enter the market sooner with a smaller deposit.
Potential upside if prices rise faster than you can save.

Cons

Increases your total borrowing cost.
Protects the lender, not you.

Ways to Reduce or Avoid LMI

Save a larger deposit to reach 80% LVR.
Consider guarantees (e.g., parental guarantee) where appropriate.
Use government schemes that allow lower deposits with reduced LMI.
Compare lenders — LMI tiers and premiums differ.

Try the tools: Borrowing Power Calculator · Repayment Estimator

General information only — not financial advice. Policies and thresholds vary by lender and can change.