On a $700,000 purchase, Lenders Mortgage Insurance runs from about $6,100 with a 15% deposit to $24,600 with 5%, and it protects the lender, not you. What it is, what it costs, and five ways to avoid it. Updated October 2026.
What is LMI?
Lenders Mortgage Insurance (LMI) is an insurance policy that lenders require when your deposit is less than 20% of the property's value, meaning your Loan-to-Value Ratio (LVR) is above 80%. Despite the name, it protects the lender if you default and the property sells for less than your outstanding loan amount. You pay the premium; the cover is the lender's.
How much does LMI cost?
LMI is a percentage of the loan, and the rate rises steeply with LVR. For a $700,000 property, by our LMI calculator (indicative 2024 premium rates, including stamp duty on the premium):
- 5% deposit (95% LVR): about $24,600
- 8% deposit (92% LVR): about $23,800
- 10% deposit (90% LVR): about $13,700
- 15% deposit (85% LVR): about $6,100
- 20% deposit (80% LVR): No LMI
LMI can typically be added to your loan (capitalised) rather than paid upfront, but you will then pay interest on it for the life of the loan, which adds up over thirty years.
Why do lenders charge LMI?
When a buyer has a small deposit, the lender takes on more risk. If the borrower defaults and the property sells for less than the outstanding loan, the lender faces a loss. LMI transfers this risk to an insurer, such as Helia (formerly Genworth). The insurer pays the lender's loss and can then pursue the borrower to recover it.
5 ways to avoid LMI
1. Save a 20% deposit
The most straightforward option. Once your deposit reaches 20% of the purchase price, LMI disappears entirely. The challenge is timing, property prices may rise while you save. See our deposit saving guide for strategies to get there faster.
2. Use the 5% Deposit Scheme
The federal 5% Deposit Scheme (formerly the First Home Guarantee) lets eligible first home buyers buy with a 5% deposit and no LMI: the government guarantees the part of the loan above 80% of the price. Since 1 October 2025 there are no income caps and no limit on places. See the full guide to the 5% Deposit Scheme.
3. Use a guarantor
If a parent or close family member owns property with sufficient equity, they can act as guarantor for part of your loan. The guarantee covers the portion between your deposit and 20% LVR, eliminating LMI without requiring you to save more. The guarantor's property serves as additional security and is released once your LVR reaches 80% through repayments or property growth.
4. Professional LMI waiver
Some lenders offer LMI waivers for specific professions considered low-risk: doctors, dentists, lawyers, accountants, and some senior engineers. These usually allow borrowing to 90% LVR or more without LMI. Lenders set their own lists of eligible professions.
5. Use an LMI-free lender at high LVR
A small number of lenders offer loans at 80–85% LVR without LMI as a competitive differentiator. These may have slightly higher interest rates to compensate, compare the total cost over your expected loan term to determine whether it's better value than paying LMI and getting a lower rate elsewhere.
Is it ever worth paying LMI?
It depends on prices while you save. On a $700,000 home, 4% growth in a year adds $28,000 to the price, more than the $13,700 LMI at a 10% deposit. If prices are flat, waiting costs nothing and the LMI is saved. Nobody knows next year's growth, so treat both as scenarios.
A mortgage broker can model both scenarios, paying LMI now vs. saving longer, using current market data for your target suburbs.