What is lenders mortgage insurance?
LMI is insurance the lender takes out, and you pay for, when your loan-to-value ratio (LVR) is above 80%. If you default and the sale of the home does not cover the debt, the insurer pays the lender the shortfall — and can then pursue you for it. So LMI makes high-LVR lending possible, but it does not protect you at all. That distinction surprises many first home buyers, who confuse it with mortgage protection insurance (which covers your repayments if you are sick or lose your job).
LVR is simply loan ÷ lender’s valuation. A $600,000 loan on a $750,000 valuation is 80%; borrow $675,000 and it is 90%. Note it is the valuation, not the price — if the bank values the home below what you paid, the LVR rises and LMI can appear unexpectedly.
How much does LMI cost in 2026?
Premiums are set by the two big insurers (or by the lender’s own captive insurer) and depend on LVR band, loan size, and whether you are a first home buyer or self-employed. Lenders rarely publish them, so the table below uses one lender’s full-doc premium rates published by Home Loan Experts (updated May 2026) at the top of each band. Treat them as a guide only.
| Loan amount | 85% LVR | 90% LVR | 95% LVR |
|---|---|---|---|
| $300,000 | $2,181 (0.73%) | $4,389 (1.46%) | $7,827 (2.61%) |
| $500,000 | $4,845 (0.97%) | $9,365 (1.87%) | $16,725 (3.35%) |
| $600,000 | $6,990 (1.17%) | $13,080 (2.18%) | $23,988 (4.00%) |
| $750,000 | $9,998 (1.33%) | $17,753 (2.37%) | $34,598 (4.61%) |
| $1,000,000 | $14,070 (1.41%) | $25,160 (2.52%) | $46,030 (4.60%) |
Two things stand out. First, the premium rate itself rises with the loan size, so bigger loans pay a higher percentage on a bigger number. Second, the jump from the 85–90% band to the 90–95% band is steep: on a $600,000 loan the rate goes from 2.18% to 4.00%. Most states also charge stamp duty on the premium — around 9–11% in most states and territories, nothing in NSW.
Worked example: $750,000 home
| LVR | Deposit | Loan | Indicative LMI | Monthly repayment (LMI added, 30 yrs) |
|---|---|---|---|---|
| 80% | $150,000 | $600,000 | $0 | $3,788 |
| 85% | $112,500 | $637,500 | $8,498 | $4,079 |
| 88% | $90,000 | $660,000 | $10,765 | $4,235 |
| 90% | $75,000 | $675,000 | $15,977 | $4,363 |
| 95% | $37,500 | $712,500 | $32,868 | $4,706 |
At 90% LVR the premium of $15,977 is typically “capitalised” — added to the loan — which costs about $101 a month at 6.49% and roughly $20,340 in extra interest over 30 years. Adding it can also push the total LVR into a higher band, so ask your broker to check the capitalised figure.
Is paying LMI ever worth it?
Sometimes. If prices in your area are rising faster than you can save, buying earlier with LMI may cost less than waiting. With rents high, every year of saving also costs a year of rent. The calculation is personal, but a useful check is to compare the LMI premium with the price growth and rent you expect over the extra saving period. If the gap is small, the certainty of a 20% deposit (and a bigger buffer against falling values) usually wins.
Four ways to avoid LMI
- Save 20% — the cleanest way, and you will usually get a sharper rate below 80% LVR too.
- Use the 5% Deposit Scheme — eligible first home buyers can borrow up to 95% with no LMI, under price caps, with no income test since 1 October 2025.
- Family guarantee — a parent uses equity in their home as extra security, so the loan is treated as under 80%.
- Professional waivers — many lenders waive LMI up to 85–90% LVR for doctors, lawyers, accountants and some other professions.
Can LMI be refunded or transferred?
Generally no. LMI is tied to the loan and the lender. If you refinance to a new lender within a few years at above 80% LVR you may have to pay LMI again, which is one reason to get the LVR under 80% (through repayments or valuation growth) before switching. Investors can usually claim LMI as a borrowing expense over five years — ask a tax agent.
FAQ
What is LMI in Australia?
Lenders mortgage insurance is a one-off premium charged when you borrow more than 80% of a property’s value. It protects the lender against a loss if you default; it does not protect you.
How much is LMI on a 10% deposit?
It depends on the loan size and insurer. Using one lender’s indicative table (May 2026), LMI at 90% LVR is about 1.87% of a $500,000 loan ($9,365) and 2.37% of a $675,000 loan ($15,977). Stamp duty on the premium may apply.
Can LMI be added to the loan?
Yes, most lenders let you capitalise LMI. On a $15,977 premium that adds about $101 a month at 6.49% over 30 years.
How can I avoid paying LMI?
Save a 20% deposit, use the 5% Deposit Scheme (First Home Guarantee) as an eligible first home buyer, use a family guarantee, or qualify for a professional LMI waiver.
Is LMI refundable if I sell or refinance?
Usually not. Some insurers offered partial refunds in the first year or two in the past, but most premiums today are non-refundable and do not transfer to a new lender.
Related home loan guides
Assumptions & sources
- RBA cash rate target 4.85%: raised 0.25 points on 3 November 2026, effective 4 November (the Monetary Policy Board voted 6–3). It was the fifth rise of 2026, after February, March, May and September. The Board’s next decision is at 2:30pm AEDT on Tuesday 8 December 2026.
- Average owner-occupier variable rate (P&I) 6.49%: Canstar estimate once the September rise was passed on (29 September 2026), in line with RBA Table F6 — new owner-occupier variable loans averaged 6.23% in August 2026, before the rise. Canstar’s average advertised rate across its whole database was 6.75% (13 October 2026) and the lowest variable rate was 5.89% (20 October 2026). As of 3 November no big-four bank had announced how it would pass on the November rise; passed on in full, it lifts the average to about 6.74%.
- Fixed rates: big-four 1–2 year fixed rates ranged from 6.49% (ANZ) to 6.81% (NAB 2-year) in October 2026; the lowest fixed rate on Canstar was 5.79% (1-year).
- APRA serviceability buffer: 3 percentage points above the loan rate (kept unchanged in APRA’s May 2026 review). From 1 February 2026 no more than 20% of a bank’s new owner-occupier lending (and separately investor lending) may be at a debt-to-income ratio of 6 or more.
- LMI: indicative full-doc premiums from one lender’s table published by Home Loan Experts (updated 18 May 2026); insurers price individually and state stamp duty on the premium may apply (none in NSW).
- 5% Deposit Scheme (First Home Guarantee): Housing Australia rules from 1 October 2025 — unlimited places, no income caps; Darwin cap raised to $750,000 from 1 July 2026.
- Repayments use standard amortisation (monthly, fortnightly or weekly compounding to match the payment) with the rate held constant for the whole term; real loans calculate interest daily and rates change.