Understanding LMI (Lenders Mortgage Insurance)

LMI protects the lender (not you) if you default on your loan. It's required when your deposit is less than 20% of the property value — in other words, when your Loan-to-Value Ratio (LVR) is above 80%.

When does LMI apply?

• LVR above 80% — you're borrowing more than 80% of the property's value.
• For example: buying a $600,000 property with a $60,000 deposit (10%) means you're borrowing $540,000 at 90% LVR. LMI applies.
• If you have a 20% deposit ($120,000), you're at 80% LVR and LMI is not required.

How much does it cost?

LMI costs scale sharply with LVR. Approximate costs on a $600,000 property:

• 85% LVR (15% deposit): ~$4,000–$6,000
• 90% LVR (10% deposit): ~$12,000–$16,000
• 95% LVR (5% deposit): ~$25,000–$35,000

The exact amount depends on the lender, loan amount, and LMI provider (Genworth or QBE in Australia).

Can you avoid LMI?

• Save a 20% deposit — the most straightforward way.
• Use a guarantor — a parent or family member can use their property equity to support your loan, often eliminating LMI.
• Professional packages — some lenders waive LMI for doctors, lawyers, and accountants at up to 90% LVR.
• Government schemes — the First Home Guarantee allows eligible first home buyers to purchase with 5% deposit and no LMI.

Is it worth paying LMI?

• LMI lets you enter the market sooner with a smaller deposit. If property prices are rising, the cost of waiting to save 20% can exceed the LMI premium.
• On a $600,000 property growing at 5%/year, waiting 2 extra years to avoid LMI means the property costs $661,500 — $61,500 more than you would have paid.
• However, higher LVR means higher repayments and more risk if property values drop.
• Run the numbers for your specific situation before deciding.

How PropPulse handles LMI

• The Deal Analysis tool automatically calculates approximate LMI when your LVR exceeds 80%.
• It's included in your upfront costs breakdown alongside stamp duty, conveyancing, and inspections.
• This gives you a realistic picture of the total cash you need on day one.

Related guides

• Stamp Duty by State
• Negative Gearing Explained
• Choosing the Right Lender Tier

Education only: LMI costs are approximate and vary by lender. Always get a specific quote from your broker or lender before making financial decisions.