Lenders Mortgage Insurance (LMI) is one of the most misunderstood costs in home buying. Many people assume it protects them. It doesn't. It protects the lender.
What LMI is
When you borrow more than 80% of a property's value, the lender takes on more risk. LMI is an insurance policy that covers the lender if you default and the property sells for less than you owe.
You pay the premium, but the lender is the insured party. If you default, the insurer may pay the lender and then pursue you for the shortfall.
How much does it cost?
LMI is a one-off premium, and it depends on:
- Your LVR: the higher the LVR, the higher the premium
- Loan size: bigger loans cost more, and premiums often jump at certain loan size thresholds
- Lender and insurer: different lenders use different insurers and rates
- First home buyer status: some insurers offer slightly lower rates
- Stamp duty on the premium, which varies by state
On a typical Sydney purchase with a 10% deposit, LMI can easily run into the tens of thousands. Always get an exact quote.
Paying LMI
Most borrowers add LMI to the loan (capitalise it). That's convenient, but it means you pay interest on it for the life of the loan. Some lenders allow LMI to be capitalised even if it takes the LVR above 95%.
How to avoid LMI
1. Save a 20% deposit
The traditional route. Slow, but no LMI and the widest choice of lenders.
2. Use the 5% Deposit Scheme
First home buyers can buy with 5% deposit and no LMI, with no income caps since October 2025. See our 5% Deposit Scheme guide.
3. Family Home Guarantee or Help to Buy
Single parents can buy with 2% and no LMI. Help to Buy also avoids LMI through a government equity share.
4. LMI waiver for professionals
Some lenders waive LMI up to 85% or 90% LVR for certain professionals, such as doctors, dentists, lawyers, accountants and some other occupations. Eligibility depends on qualifications, registration and income.
5. Family guarantee
A family member uses equity in their property to guarantee part of your loan, so you don't need LMI.
Is paying LMI ever worth it?
Sometimes. If prices are rising faster than you can save, paying LMI to buy sooner can make sense. In a falling market, as in Sydney and Melbourne in 2026, the case for rushing is weaker.
Compare:
- The LMI cost
- The rent you'd pay while saving
- The likely change in prices while you save
LMI and refinancing
LMI isn't transferable. If you refinance above 80% LVR, you'll usually pay LMI again with the new lender.
Is LMI refundable?
Generally no, though some insurers offer partial refunds if the loan is paid out within the first year or two. Don't count on it.
Frequently asked questions
Is LMI tax deductible?
For investment properties, LMI is generally deductible over five years or the loan term if shorter. For your own home, no.
Is LMI the same as mortgage protection insurance?
No. Mortgage protection insurance covers you if you can't work. LMI covers the lender.
Can I get LMI waived as a nurse?
Some lenders offer reduced LMI or waivers for certain health professionals. Policies change, so ask us.
Want an exact LMI quote, or to see if you can avoid it altogether? Call Finfident on 02 6416 2142, or Call, Text or WhatsApp 0424 545 654.
Want to know if this applies to you?
Talk it through with a Finfident broker. It's free and there's no obligation.
