Quick Answer

LMI is a one-off insurance premium paid by the borrower that protects the lender — not you — if you default and the property sells for less than the loan balance. LMI applies when your LVR exceeds 80% (deposit less than 20%). Costs vary significantly by lender, loan size and LVR. General information only — individual costs vary.

What LMI covers — and what it doesn't

LMI protects the lender's exposure above 80% LVR. If you default and the property sells below the outstanding loan balance, LMI covers the lender's shortfall. It does not protect you — if there is a shortfall after LMI pays out, the lender may still pursue you for the difference. LMI is not home insurance or income protection.

How much does LMI cost?

LMI costs increase with LVR and loan size. Indicative figures (vary significantly — always get a specific quote): a $600,000 loan at 90% LVR may incur LMI of approximately $8,000–$15,000; at 95% LVR it may be $15,000–$25,000+. LMI is usually capitalised into your loan, increasing total interest paid. Always confirm the specific LMI cost for your loan before proceeding.

Ways to avoid LMI

Common approaches (conditions and risks apply): save a 20%+ deposit; use a guarantor loan (significant risk to the guarantor — independent legal advice essential); qualify for the First Home Guarantee (5% deposit, no LMI, limited places, eligibility conditions); use the First Home Super Saver Scheme to boost savings. Each approach has trade-offs — seek independent advice.

Is paying LMI ever reasonable?

In some circumstances, paying LMI allows buyers to enter the market earlier than they could by saving a 20% deposit. Whether this outweighs the LMI cost depends on individual circumstances, the market and the time it would take to save more. This is a personal financial decision — not financial advice. Individual outcomes vary significantly.

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Frequently asked questions

The borrower (buyer) pays LMI, even though it protects the lender. It is typically capitalised into your loan balance rather than paid upfront, so you pay interest on it over the loan life.
Reviewed by Chris Brown, ACL 384704 · 13 January 2026
LMI is generally not transferable or refundable when refinancing to a new lender. If your LVR is still above 80% at the new lender, you may pay LMI again. Factor this into the cost-benefit calculation when considering refinancing. Individual lender policies vary.
Reviewed by Chris Brown, ACL 384704 · 13 January 2026
No. LMI protects the lender. Home and contents insurance protects your property and belongings. Both are separate products with different purposes. Lenders require home insurance at settlement — confirm the requirements with your lender and insurer.
Reviewed by Chris Brown, ACL 384704 · 13 January 2026
About this article

Written and reviewed by Chris Brown, CEO & Founder of New Vision Financial Services. Authorised Credit Representative of Finsure Finance and Insurance Pty Ltd (ACL 384704). Published 13 January 2026. General information only — not financial, legal or taxation advice. Individual circumstances vary. Seek independent advice before making financial decisions.