Lenders Mortgage Insurance (LMI) is one of the most misunderstood costs in Australian property. It is NOT insurance for you — it protects the lender if you default. Yet you pay for it. Here is everything you need to know.
When Do You Pay LMI?
LMI is triggered when your deposit is less than 20% of the purchase price (LVR above 80%). The smaller your deposit, the higher the LMI premium.
LMI Cost Table
| Purchase Price | Deposit (10%) | LVR | LMI Premium (approx) |
|---|---|---|---|
| $500,000 | $50,000 | 90% | $8,800 |
| $750,000 | $75,000 | 90% | $14,250 |
| $1,000,000 | $100,000 | 90% | $19,600 |
| $1,500,000 | $150,000 | 90% | $30,400 |
| $500,000 | $25,000 | 95% | $17,800 |
How to Avoid LMI
- Save a 20% deposit (the cleanest way)
- Use a guarantor (family guarantee using parents’ equity)
- Access the First Home Guarantee (government guarantees up to 15% — no LMI)
- Use a profession-specific LMI waiver (doctors, lawyers, accountants qualify at many lenders)
- Buy with a partner and combine deposits
Should You Pay LMI to Enter the Market Earlier?
In a rising market, LMI can be worth paying. If a suburb grows 8% per year, a $800k property grows by $64k/year. Paying $15k in LMI to enter 12 months earlier means you capture $64k in growth for a $15k cost. In a flat or falling market, wait and save the full 20%.
GeeVee can model whether entering now (with LMI) or waiting beats your specific situation: collings.com.au/portal
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