Lenders Mortgage Insurance (LMI) Explained: Complete 2026 Guide
Everything you need to know about LMI - what it is, how much it costs, and strategies to avoid paying it.
Raj Bhangu
Principal Mortgage Broker
Key Takeaways
- 1LMI protects the lender (not you) if you default - required when borrowing over 80% LVR
- 2LMI costs: 5% deposit = $28,000-$35,000; 10% deposit = $12,000-$16,000 on $700K property
- 3Avoid LMI: save 20% deposit, use First Home Guarantee, family guarantee, or professional packages
- 4First Home Guarantee allows 5% deposit purchase without paying LMI
Lenders Mortgage Insurance (LMI) is often misunderstood. This guide explains exactly what it is, when you need to pay it, and how to avoid it altogether.
What Is LMI?
LMI is an insurance policy that protects the lender (not you) if you default on your mortgage. It's required when you borrow more than 80% of the property's value.
How Much Does LMI Cost?
LMI costs vary based on your loan amount and Loan-to-Value Ratio (LVR). For a $700,000 property:
- 5% deposit ($35,000) = LMI of $28,000-$35,000
- 10% deposit ($70,000) = LMI of $12,000-$16,000
- 15% deposit ($105,000) = LMI of $5,000-$8,000
How to Avoid LMI
- Save a 20% deposit: The most straightforward way
- First Home Guarantee: Government scheme allowing 5% deposit without LMI
- Family guarantee: Parents use equity in their home as security
- Professional packages: Some lenders waive LMI for certain professions
Use our LMI calculator to see your potential costs, or speak with our team about LMI waiver strategies.
Related Tool
Borrowing Power Calculator
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Sources & References
This article references information from the following authoritative sources:
Raj Bhangu
Principal Mortgage Broker
Expert mortgage broker helping Australians achieve their property dreams with personalized home loan solutions.
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As a mortgage broker, iSmart Finance receives commissions from lenders when we successfully arrange a home loan. This does not affect the interest rate or fees you pay. Our service is free for you, and we're committed to finding the best loan for your needs.
About iSmart Finance
iSmart Finance Group ACN 608 986 554 is Credit Representative 481761 of BLSSA Pty Ltd ACN 117 651 760 (Australian Credit Licence 391237). We are members of the Finance Brokers Association of Australia (FBAA) and comply with the National Consumer Credit Protection Act 2009.
Our content is based on industry expertise, regulatory guidelines from ASIC and APRA, and data from the Reserve Bank of Australia. All information is current as of the publication date and subject to change.
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