Last updated: July 2026 · Reviewed by John Pierre Saliba, Director and Mortgage Broker, MFAA Accredited
What Is LMI and Why Do You Pay It?
Lenders Mortgage Insurance (LMI) is an insurance premium paid by the borrower that protects the lender, not the borrower, in the event of default. It kicks in when a borrower borrows more than 80% of a property's value (LVR above 80%). The lender faces greater risk at high LVR, and LMI transfers that risk to an insurance company. If you default and the property sells for less than the loan balance, the LMI insurer compensates the lender.
The key point that surprises many borrowers: LMI protects the lender, not you. If you default, the insurer pays the lender, then pursues you for that amount. You are still liable for the shortfall.
LMI is often framed purely as a cost to avoid. But in a rising market, the framing changes. If paying $22,000 in LMI gets you into a $750,000 property 3 years earlier than waiting for a 20% deposit, and that property appreciates $120,000 in those 3 years, you're $98,000 ahead despite the LMI cost. LMI avoidance at all costs is not always the right financial decision. Timing is everything.
LMI Cost Table, (Approximate)
- $500,000 at 90% LVR: ~$7,800
- $500,000 at 95% LVR: ~$14,500
- $700,000 at 90% LVR: ~$11,200
- $700,000 at 95% LVR: ~$20,600
- $900,000 at 90% LVR: ~$14,400
- $900,000 at 95% LVR: ~$26,500
- $1,200,000 at 90% LVR: ~$19,200
LMI is calculated by Genworth or QBE (the two main LMI providers in Australia) based on LVR and loan amount. Exact premiums vary by lender. Use our LMI Calculator for a precise figure.
Can LMI Be Added to the Loan?
Yes, most lenders allow LMI to be capitalised (added to the loan balance) rather than paid upfront. This means you don't need the cash upfront, but you do pay interest on the LMI amount for the life of the loan. On a $22,000 LMI premium at 6.49% over 30 years, the total interest cost on that premium is approximately $24,500, making the true cost of LMI significantly higher than the headline premium.
7 Ways to Avoid LMI
- 1. Save a 20% deposit: The most direct route. Takes longer but eliminates LMI entirely.
- 2. First Home Guarantee: 5% deposit, government guarantees 15%, no LMI. Income/price capped.
- 3. Family Home Guarantee: 2% deposit for single parents, no LMI. Income capped.
- 4. Guarantor loan: Family member uses their property equity. No LMI, no income cap, no price cap.
- 5. Professional LMI waiver: Doctors, dentists, lawyers, accountants and other eligible professionals can borrow up to 90%+ with no LMI at specific lenders.
- 6. Location-based LMI waiver: Some lenders waive LMI for properties in designated high-value suburbs, regardless of profession.
- 7. LMI-free products: Some specialist lenders offer products with no LMI requirement at higher LVRs, typically at slightly higher rates.
Professional LMI Waivers, Who Qualifies?
Several lenders offer LMI waivers for specific professions, allowing eligible borrowers to borrow up to 90–95% without LMI. Eligible professions typically include:
- Medical doctors (GPs, specialists, surgeons)
- Dentists and dental specialists
- Pharmacists
- Lawyers and barristers
- Accountants (CA, CPA, CIMA)
- Senior executives (income threshold applies)
- Engineers and other professionals (lender-specific)
When Paying LMI Makes Financial Sense
In a rising market, the opportunity cost of waiting to save a larger deposit can exceed the LMI cost. The calculation:
- Property value: $800,000 | Annual growth rate: 6%
- Growth in 2 years (time to save extra 15%): $800,000 × 1.06² = $899,280 (+$99,280)
- LMI cost at 5% deposit: ~$24,000
- Net financial position of buying now vs waiting: +$75,280 better off buying now (despite LMI)
This calculation changes in a flat or falling market, where waiting preserves capital and the LMI cost isn't offset by price growth.
