What is LMI (Lenders Mortgage Insurance)?

Part of the Everstone mortgage glossary · Reviewed June 2026

How LMI works

LMI is triggered by your loan-to-value ratio (LVR). Borrow more than 80% of the property's value and most lenders will require an LMI premium before they approve the loan. The premium scales with both the loan size and how far above 80% you go: as a rough guide, on a $600,000 purchase with a 10% deposit, LMI commonly lands somewhere between $10,000 and $15,000, and it rises quickly at 95% lending.

Two things surprise borrowers. First, the insurance protects the bank, not you — if the property were repossessed and sold at a shortfall, the insurer can still pursue you for the difference. Second, most people never pay it in cash: the premium is usually capitalised, meaning it's added to the loan, so you also pay interest on it for the life of the loan.

Ways to avoid or reduce LMI

• A 20% deposit — the straightforward route: at or below 80% LVR, no LMI applies.
• A guarantor — a family member's equity can substitute for the missing deposit. See guarantor home loans.
• Profession-based waivers — several lenders waive LMI at up to 90–95% for selected professions (medical, legal, accounting, and at some lenders nurses and other essential workers).
• The Home Guarantee Scheme — eligible first home buyers can purchase with as little as 5% deposit while the government guarantees the gap, so no LMI is payable.
• Lender specials — a handful of lenders periodically offer reduced or waived LMI at 85% LVR.

Common questions about LMI

Does LMI protect me if I can't repay?

No. It protects the lender's loss, not yours. If you're worried about protecting your own repayments, that's a separate conversation about income protection insurance.

Is LMI refundable if I refinance or sell early?

Generally no. Some insurers historically offered partial refunds if a loan closed within the first year or two, but you should treat LMI as a sunk cost — which is why it's worth structuring to avoid it in the first place.

Is paying LMI ever the right move?

Sometimes, yes. If prices in your target area are rising faster than you can save the remaining deposit, paying LMI to buy years earlier can work out cheaper overall. It's a numbers exercise, not a rule.

Related terms: LVR · Guarantor home loans · Full glossary

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