What Is Lenders Mortgage Insurance (LMI)?
Updated 2 September 2026 · 5 min read
Lenders Mortgage Insurance (LMI) is insurance that may be required when the loan is a high proportion of the property value. It generally protects the lender, not the borrower, if the borrower cannot meet the loan obligations.
How LVR relates to LMI
Loan-to-value ratio (LVR) is the loan amount divided by the property value. For example, a $540,000 loan on a $600,000 home has a 90% LVR. LMI is commonly considered above 80% LVR, but whether it applies and its cost depend on the lender, insurer, product and borrower profile. A 20% deposit is not a universal rule or a guarantee that no LMI will be charged.
When can LMI apply?
- It is most common when the LVR is above 80%.
- Some lender policies, professions, guarantor arrangements and government schemes can change the outcome.
- If the lender allows it, the premium may be paid upfront or capitalised into the loan, which increases the balance on which interest is charged.
How Much Does LMI Cost?
LMI is priced case by case. It can be a significant purchase cost, but a simple dollar example can be misleading because premiums vary with the loan amount, LVR, lender, insurer, product and application details. BorrowPower's purchase planner shows an approximation for planning only; it is not an LMI quote and it does not model LMI at or above 95% LVR.
Pros & Cons of Paying LMI
Pros
- Enter the market sooner with a smaller deposit.
- May allow an eligible buyer to purchase with a smaller deposit.
Cons
- Can increase the upfront cost or the loan balance if capitalised.
- Does not insure the borrower against property-price falls or repayment difficulty.
Ways to Reduce or Avoid LMI
- Save a larger deposit where that fits your overall purchase plan.
- Consider a guarantor or government scheme only after understanding the risks and eligibility rules.
- Compare the full loan cost, not only the LMI premium.
- Ask the lender for the actual premium and whether it can be paid upfront or capitalised.
Try the tools: Deposit & Upfront Cost Calculator · First Home Buyer Scheme Checker · Repayment Estimator
Sources and review
Last reviewed 2 September 2026. Read Helia's LMI overview and BorrowPower's data and methodology before relying on an estimate.
General information only — not financial advice. Policies and thresholds vary by lender and can change.