What is Lenders Mortgage Insurance (LMI) – and do you really need it?

Understanding Lenders Mortgage Insurance (LMI)

If you’re looking to buy property with less than a 20% deposit, you’ve probably heard of Lenders Mortgage Insurance (LMI). But what is it, really—and how does it impact your borrowing power?

Let’s unpack it in clear, practical terms.

What is LMI?

Lenders Mortgage Insurance is a one-off insurance premium that protects the lender, not the borrower. It’s typically required when your Loan to Value Ratio (LVR) exceeds 80%, meaning you’re borrowing more than 80% of the property’s value.

For example:
If you’re purchasing a $1,200,000 home with a $120,000 deposit (10%), your LVR is 90%—and LMI will almost certainly apply.

Why lenders charge LMI

From a lender’s perspective, high-LVR loans carry more risk. If a borrower defaults and the property is sold at a loss, LMI helps cover that shortfall. While it’s for the lender’s protection, the cost is passed on to you, the borrower.

You can pay LMI upfront or have it added to your loan.

How much does it cost?

The LMI premium varies depending on:

• Your loan amount
• The size of your deposit
• Your employment or profession
• The lender’s individual pricing model

Some lenders waive LMI for specific professions (such as lawyers, accountants, and medical professionals)—even with just a 10% deposit. This is where having a strategic broker like myself, can make all the difference.

Can you avoid paying LMI?

Absolutely. Some common ways include:

• Saving a 20% deposit
• Using a guarantor, often a parent or close relative
• Qualifying for a professional LMI waiver
• Structuring your application with the right lender

Not every lender offers the same flexibility and knowing which to approach is key. That’s where I come in.

Is paying LMI always a bad thing?

Not necessarily. In many cases, LMI allows you to:

• Get into the market sooner
• Keep cash reserves for renovations, investing, or emergencies
• Benefit from capital growth, especially in a rising market

Sometimes, the cost of waiting to save a full deposit can outweigh the cost of LMI.

How I help my clients navigate LMI

I specialise in helping established professionals and families make confident, informed decisions. Whether that’s reducing LMI, negotiating a waiver, or planning a strategy to avoid it altogether—I’ll guide you every step of the way.

I work with clients across Australia and tailor every lending strategy to fit your short- and long-term financial goals.

Let’s explore your options

Thinking about buying, refinancing, or investing? Let’s talk about how LMI fits into your strategy—and how we can potentially reduce or eliminate it.