If you’re buying with less than a 20% deposit, you’ve probably heard about Lenders Mortgage Insurance (LMI).
For many buyers, LMI sounds like a penalty. But in reality, it can be a strategic tool that helps you enter the property market sooner.
What Is Lenders Mortgage Insurance?
LMI is a one-off insurance premium that protects the lender, not the borrower, if the loan goes into default.
It usually applies when:
• Your deposit is less than 20%
• Your loan is more than 80% of the property value
The cost is typically added onto your loan amount rather than paid upfront.
How Much Does LMI Cost?
The cost varies depending on:
• Property value
• Deposit size
• Loan amount
• Lender
Example (indicative only):
5% deposit on $700,000 purchase – LMI may range between $20,000–$30,000
10% deposit on $700,000 purchase – LMI may range between $10,000–$18,000
Is Paying LMI Worth It?
If you wait several years to save a 20% deposit:
• Property prices may rise
• You continue paying rent
• You miss potential capital growth
In some cases, paying LMI allows you to enter the market sooner and build equity earlier.
Are There Ways to Avoid LMI?
Possible options include:
• First Home Guarantee Scheme (if eligible)
• Family guarantee
• Certain professional lending policies (limited lenders)
Final Thoughts
LMI is not automatically good or bad — it is a financial tool. The key question is whether buying sooner outweighs the cost of waiting.
If you are unsure, a personalised assessment can compare both options clearly.