What is LMI and when do you pay it in Australia?

Lenders Mortgage Insurance (LMI) is a one-off insurance premium paid by the borrower when the loan-to-value ratio (LVR) exceeds 80% — meaning your deposit is less than 20% of the purchase price. LMI protects the lender if you default and the property sale doesn't cover the outstanding loan. It does not protect you. The premium is typically 0.5%–4% of the loan amount depending on LVR and loan size, and can be added to the loan balance.

How it affects your borrowing

LMI directly reduces how much property your deposit can buy. On a $700,000 purchase with a 10% deposit ($70,000), LMI can cost $10,000–$15,000 — money that can't go toward deposit. GetReal's calculator accounts for LMI automatically, which is why the maximum purchase price drops sharply when your LVR crosses the 80% threshold.

Worked example

LMI cost at different LVR levels — $600,000 purchase, NSW

80% LVR — loan $480,000No LMI

85% LVR — loan $510,000≈ $4,550 LMI + $410 stamp duty on LMI

90% LVR — loan $540,000≈ $7,720 LMI + $695 stamp duty on LMI

95% LVR — loan $570,000≈ $17,600 LMI + $1,584 stamp duty on LMI

NoteLMI stamp duty is charged on the premium itself (9% in NSW)

Key factors

LMI applies when LVR exceeds 80% — regardless of loan size or income.
The premium is charged as a percentage of the loan amount, not the purchase price.
Most states charge stamp duty on the LMI premium itself — adding 9–10% on top.
LMI can be capitalised into the loan (added to the balance) — you don't pay upfront but pay interest on it over the loan term.
The First Home Guarantee allows eligible first home buyers to borrow up to 95% LVR with no LMI.

See how this affects your specific situation

Calculate your LMI cost

Frequently asked questions

Does LMI protect me if I can't make repayments?

No. LMI protects the lender, not you. If you default and the property sells for less than the outstanding loan, LMI covers the lender's shortfall. The insurer may then pursue you for recovery of that shortfall.

Can I avoid LMI?

Yes — if you have a 20% deposit, or use the First Home Guarantee (eligible first home buyers, up to 95% LVR). Some lenders also waive LMI for specific occupations including doctors, dentists, lawyers, and some engineers — check with a mortgage broker.

Is LMI a one-off cost?

Yes. LMI is a one-off premium at settlement. If you refinance later, a new LMI assessment applies to the new loan — you don't get a refund on the original premium (though some insurers offer a partial refund in the early years if the loan is discharged).

How does GetReal calculate LMI?

GetReal uses indicative LMI rates from the Home Loan Experts rate table (May 2026), stored in Supabase and fetched at calculation time. Actual costs depend on your lender and insurer (Genworth or QBE). Use the calculator for an estimate, then confirm with your lender.

This page is part of GetReal's methodology documentation. Figures are updated when underlying data in our Supabase database changes. This is not financial advice.