Lenders Mortgage Insurance — LMI — is the cost that catches more first home buyers off guard than any other. You save your deposit, work out your numbers, get excited about a place, and then a lender quietly adds $3,000 to $32,000 on top of everything else. Nobody warned you. In 2026 LMI is still the single biggest hidden cost for Australian buyers with less than a 20 per cent deposit, and yet it is also the cost most first home buyers can now legally skip thanks to the uncapped First Home Guarantee.
This guide covers what LMI actually is, when you have to pay it, how it is worked out, what it costs at every deposit level, who qualifies for a waiver, and seven legitimate ways to avoid paying it. We will also clear up the question almost nobody answers honestly: no, LMI does not disappear once your equity hits 20 per cent.
LMI at a glance
- When it applies: your deposit is under 20 per cent (loan-to-value ratio above 80 per cent).
- Who it protects: the lender, not you — even though you are the one who pays for it.
- What it is: a one-off, non-refundable premium, paid at settlement or added to your loan.
- Typical cost: roughly $3,000 to $32,000+, depending on your deposit and the property price.
What is LMI?
Lenders Mortgage Insurance protects the lender, not you — even though you pay for it. If you default on your home loan and the bank sells the property for less than you owe, LMI covers the lender's shortfall. It does nothing for you. According to ASIC's Moneysmart, LMI is required when your deposit is less than 20 per cent of the property value — in lending terms, when your loan-to-value ratio (LVR) is above 80 per cent.
It is a one-off premium, paid either upfront at settlement or capitalised onto your loan balance. Capitalise it and you pay interest on the premium for the life of the loan, which makes the real cost a fair bit higher than the figure you are quoted.
In 2026 the main LMI providers are Helia (formerly Genworth, rebranded in 2022), QBE and Arch — with Arch taking over the Commonwealth Bank and Bankwest LMI business from early 2026. You do not get to choose; your lender picks the provider. Some big lenders, including ANZ, Westpac Group and Macquarie, do not use an external insurer at all — they self-insure and charge their own low-deposit premium instead, which may show up on your loan documents under a different name.
One thing worth being clear on: LMI is not the same as home insurance or mortgage protection insurance. Home insurance covers your building and contents. Mortgage protection insurance covers your repayments if you lose your income. LMI covers neither. If you lose your job, fall ill, or simply cannot make repayments, LMI will not help you at all — it only ever pays out to the bank.
When do you have to pay LMI?
You pay LMI whenever you borrow more than 80 per cent of a property's value — that is, whenever your deposit is under 20 per cent. Borrow at or below 80 per cent (a deposit of 20 per cent or more) and there is no LMI at all. The 80 per cent LVR line is the trigger, and it has not moved in 2026.
There are two ways to pay it:
- Upfront at settlement — you pay the premium as a lump sum out of your own funds on the day the loan settles.
- Capitalised onto the loan — the premium is added to your loan amount, so you pay it off (with interest) over the loan term. This is the more common choice for first home buyers who are short on cash, but it costs more in the long run.
What matters is your LVR at the time you take out the loan. If your deposit is even slightly under 20 per cent, most lenders will require LMI — so getting just over the 80 per cent line can wipe the cost out entirely. You can check exactly where you sit with our LMI calculator and track your savings toward the next band with the deposit tracker.
How is LMI calculated?
LMI is worked out as a percentage of your loan amount, and that percentage rises sharply as your deposit shrinks. The premium is not a flat fee — it is risk-based pricing, so the less you put down, the more it costs, both in dollars and as a share of the loan.
The main things the insurer (or self-insuring lender) looks at are:
- Your loan amount — a bigger loan means a bigger premium.
- Your deposit size / LVR — the biggest driver. The jump from a 90 per cent to a 95 per cent LVR can roughly double the premium.
- The property value.
- Owner-occupier vs investment — investment loans usually attract higher premiums.
- Employment type — some lenders price self-employed or casual borrowers differently.
Because the insurer sets the premium and you do not get to negotiate it, two borrowers with identical loans can pay different LMI depending on which lender — and which insurer — they end up with. You cannot shop around for LMI directly. What you can do is shop around for a lender, and that is where the numbers move. Run your borrowing scenario through our borrowing power calculator to see how loan size and deposit interact before you talk to a lender.
How much does LMI cost?
LMI costs vary a lot depending on your deposit size and property value. Here are estimated ranges for 2026, drawn from typical insurer premium tables and consistent with the figures our own LMI calculator returns:
| Property Price | 5% Deposit (95% LVR) | 10% Deposit (90% LVR) | 15% Deposit (85% LVR) |
|---|---|---|---|
| $500,000 | $15,000–$16,000 | $8,000–$13,000 | $3,000–$5,000 |
| $650,000 | $20,000–$22,000 | $10,000–$15,000 | $4,000–$7,000 |
| $800,000 | $28,000–$32,000 | $14,000–$18,000 | $5,000–$8,000 |
These are estimates — your actual premium will vary by lender and insurer. The takeaway is that even a small bump in your deposit percentage can save you thousands.
LMI on a 5% deposit
A 5 per cent deposit (95 per cent LVR) is the most expensive band. On a $500,000 home you are looking at roughly $15,000–$16,000; on a $650,000 home, $20,000–$22,000; on an $800,000 home, up to about $32,000. This is exactly the band the First Home Guarantee is designed to wipe out — more on that below.
LMI on a 10% deposit
At a 10 per cent deposit (90 per cent LVR) the premium roughly halves compared with 5 per cent: about $8,000–$13,000 on a $500,000 home and $10,000–$15,000 on a $650,000 home. This is the band where a professional waiver or a guarantor can save you the most.
LMI on a 15% deposit
A 15 per cent deposit (85 per cent LVR) brings the cost down to roughly $3,000–$8,000. At this point LMI is often a manageable amount, and paying it to buy sooner can stack up against the cost of waiting.
One more thing on cost. If you capitalise a $15,000 premium onto your loan and pay it off over 30 years, the interest adds up. At around a 6 per cent interest rate, for example, that $15,000 premium can end up costing you well over $30,000 in total repayments over the full term. (For context, the RBA cash rate sat at 4.35 per cent as of mid-2026, with the lowest advertised owner-occupier variable rates around 5.7 per cent — so treat that figure as an illustration, not a quote.) It is a real reason to take LMI seriously rather than wave it through.
Estimate your own LMI premium with NestPath's free LMI calculator →
7 ways to avoid or reduce LMI
There are seven legitimate ways Australian first home buyers can avoid or cut LMI in 2026. None of them are loopholes — they are the schemes and lending structures the system is built around.
1. Save a 20 per cent deposit
The cleanest way to avoid LMI is to put down 20 per cent or more, which keeps your LVR at or below 80 per cent and removes the premium entirely. On a $650,000 property that is a $130,000 deposit. The catch is that saving 20 per cent takes years, and prices often move faster than you can save — which is exactly why the schemes below exist.
2. Use the First Home Guarantee (5% Deposit Scheme)
The federal First Home Guarantee lets eligible first home buyers purchase with just a 5 per cent deposit and pay zero LMI — the government guarantees the gap between your deposit and 20 per cent, so the lender does not require it. Since 1 October 2025, per Housing Australia, there are no income caps and no place limits, and the scheme now sits under the government's Australian Government 5% Deposit Scheme branding. This is the single most powerful tool available to Australian first home buyers in 2026.
Property price caps still apply, and they were lifted significantly from 1 October 2025 (current as at June 2026). The cap depends on whether you are buying in a capital city or major regional centre, or in the rest of the state — and the regional cap is lower:
- Sydney and NSW capital-city / major regional centres — $1,500,000
- Rest of NSW (regional) — $800,000
- Brisbane and Canberra — $1,000,000
- Melbourne — $950,000
- Adelaide — $900,000
- Perth — $850,000
- Hobart — $700,000
- Darwin — $600,000
The capital-city caps above apply to each state's capital and listed major regional centres; lower caps apply to the rest of each state, so check the exact figure for your suburb before you assume you qualify. You can confirm whether you qualify with our first home buyer eligibility checker, and see the full scheme breakdown in our first home buyer grants guide and the grants hub.
3. Use the Family Home Guarantee
Single parents and eligible single legal guardians can use the Family Home Guarantee to buy with as little as a 2 per cent deposit and pay no LMI. It is open to both first home buyers and previous owners who do not currently own a home, and in line with the October 2025 changes the income cap on this scheme was removed too. It is one of the most generous and most underused housing schemes in the country.
4. Get a professional LMI waiver
Borrowers in certain lower-risk professions — doctors, lawyers, accountants, engineers, nurses and others — can access LMI waivers from select lenders, letting them borrow up to 90 (sometimes 95) per cent without paying LMI. On a typical first home that is $8,000 to $18,000 saved. We cover who qualifies in detail below; a mortgage broker can tell you which lenders are offering waivers right now.
5. Use a guarantor
If a parent or close family member owns property with enough equity, they may be able to act as guarantor on your loan. The lender effectively treats your deposit as larger than it is, which can remove LMI even with a small cash deposit. Guarantor loans carry real risk for the guarantor, so everyone involved should get independent legal advice from a qualified conveyancer or solicitor before signing anything.
6. Boost your deposit with the FHSS scheme
The First Home Super Saver Scheme lets you make voluntary super contributions and later withdraw them — plus deemed earnings — toward your first home deposit. You can release up to $50,000 per person ($100,000 for a couple buying together), per the ATO. A bigger deposit gets you closer to the next LVR band and a smaller LMI bill.
7. Use Keystart (WA buyers)
Western Australian buyers can access Keystart home loans with as little as a 2 per cent deposit and no LMI at any LVR — Keystart is a state-government lender that does not charge it. Income and property price caps apply. For eligible WA buyers it is one of the best paths into a first home anywhere in the country; see our WA grants and schemes page for how it fits alongside the state's other support.
LMI waivers — who qualifies?
An LMI waiver lets you borrow up to 90 per cent LVR — sometimes 95 — without paying any LMI, and the saving runs from $8,000 to $32,000 depending on your loan size. Lenders offer these waivers to borrowers in professions they consider lower risk, on the basis that stable, high-demand careers default less often.
Professions that commonly qualify include:
- Medical professionals — doctors, dentists, specialists, pharmacists, optometrists, veterinarians
- Legal professionals — solicitors, barristers
- Financial professionals — accountants (CA or CPA qualified), actuaries, financial planners
- Engineers — qualified engineers across most disciplines
- Healthcare workers — nurses, midwives, physiotherapists (select lenders)
- Public sector professionals — teachers, police officers, paramedics, firefighters (select lenders)
Eligibility varies a lot between lenders. Some set minimum income thresholds, some require registration with a professional body, and the list of qualifying professions changes regularly. The key thing is that these waivers are rarely advertised — you generally reach them through a mortgage broker who knows which lenders are running them and what the current criteria are. If you are in any of these fields, say so upfront. It can save you tens of thousands.
Can you get rid of LMI once you hit 20% equity?
No. This is the question buyers get wrong more than any other, and the honest answer matters. Australian LMI is a one-off, non-refundable, non-transferable premium. Once it is paid, it is paid — your equity growing past 20 per cent does not remove it, refund it, or cancel anything.
It trips people up because of the American comparison. In the United States, Private Mortgage Insurance (PMI) is an ongoing monthly charge that lenders must, by law, automatically cancel once you reach a set equity threshold. Australian LMI works nothing like that. It is not monthly, it is not tied to your current equity, and it never auto-cancels. You pay it once, at the start, for that specific loan — and if your home doubles in value next year, you still do not get it back.
The practical lesson: there is no wait-it-out strategy with LMI. The only ways to avoid the cost are the seven above, applied before you settle — not after.
Do you pay LMI when refinancing or buying your next home?
Yes, potentially. LMI does not follow you between loans or lenders. If you refinance to a new lender while still borrowing above 80 per cent LVR, you generally pay fresh LMI on the new loan — there is no grandfathering and no transfer of your existing policy. Same goes for buying your next home: a new loan above 80 per cent means new LMI.
There are two ways to sidestep it. If you have built enough equity to refinance at 80 per cent LVR or below, no LMI applies. And if you refinance internally — staying with your current lender and not increasing your borrowing above the original level — you usually will not be charged again. It is the move to a new lender above 80 per cent that triggers a fresh premium, so weigh the LMI cost against any rate saving before you switch.
Can you get an LMI refund?
Sometimes — but it depends entirely on which insurer your lender used, not on a single national rule.
If your loan was insured by QBE, you may be entitled to a partial refund when you fully discharge the loan early, on a sliding scale: discharge within 12 months and the refund is larger; discharge between 12 and 24 months and it is smaller; after that, generally nothing. The first 12 months is where the meaningful money is, and stamp duty on the premium is usually excluded from any refund.
If your loan was insured by Helia (formerly Genworth), the picture is tighter: Helia generally no longer offers premium refunds on discharge. What it may offer instead is an internal discount if you refinance or increase your loan while staying with the same lender.
A few practical points apply either way:
- The refund is processed through your lender, who passes it on to you — and they usually have to notify the insurer within a short window of discharge.
- If you refinance to the same lender's product (rather than a different lender), a cash refund generally is not on the table.
- Processing can take several weeks.
If you paid LMI recently and you are thinking about selling or refinancing, ask your broker who the insurer was and whether a refund is possible before you proceed — it can change the maths.
LMI vs mortgage protection insurance
These are two completely different products, and confusing them is a common and costly mistake:
| Feature | LMI (Lenders Mortgage Insurance) | Mortgage Protection Insurance |
|---|---|---|
| Who it protects | The lender | You (the borrower) |
| When it's required | Deposit under 20% | Never required — optional |
| What it covers | Lender's loss if you default | Your repayments if you lose income |
| Cost | $3,000–$32,000+ (one-off) | Ongoing premium, varies widely by age and cover |
| Tax deductible | Yes — for investment properties | Sometimes — depends on the policy |
LMI is mandatory when the lender requires it. Mortgage protection insurance is always optional. If you are worried about keeping up repayments when life throws a curveball, mortgage protection insurance is worth discussing with your broker — but treat it as a separate decision from LMI, not a substitute for it.
LMI for first home buyers
First home buyers cop LMI harder than anyone, simply because they tend to have the smallest deposits. If you are buying your first home in 2026, here is the practical reality by deposit level:
- Under 5 per cent deposit — most mainstream lenders will not approve the loan at all. Keystart (WA) and the Family Home Guarantee (2 per cent) are the exceptions.
- 5 per cent deposit — the First Home Guarantee eliminates LMI entirely. Without it, LMI runs $15,000 to $32,000 depending on the property.
- 10 per cent deposit — LMI is $8,000 to $18,000 unless you qualify for a professional waiver or use a guarantor.
- 15 per cent deposit — LMI is $3,000 to $8,000, the band where paying it to buy sooner often makes sense.
- 20 per cent deposit — no LMI required.
LMI is only one line in the budget. Check whether you qualify for a no-LMI scheme with our eligibility checker, and do not forget the other upfront costs — stamp duty (estimate it with our calculator), conveyancing fees and building inspections. Our first home buyer checklist walks through the lot, and the deposit guide shows how the deposit and LMI move together.
Should you pay LMI or wait to save 20%?
This is the question every buyer with less than 20 per cent has to answer, and the honest reply is: it depends on your market.
Take a buyer in Melbourne looking at a $650,000 property. Going from a 10 per cent deposit to 20 per cent — an extra $65,000 — might take two to three years. If prices in their area rose at, say, 5 per cent a year over that stretch (an illustration, not a forecast), that $650,000 home becomes roughly $715,000. Now they need a 20 per cent deposit of about $143,000 instead of $130,000, and they have sat out the capital growth they would have captured by buying sooner. In that case, paying $10,000 to $15,000 in LMI to buy now can come out ahead of waiting.
But it cuts both ways. If you are already close to 20 per cent — say 17 or 18 per cent — it is usually worth saving the extra few months rather than paying a premium. And if prices in your target area are flat or falling, there is no rush to beat the clock. Nobody can promise you 5 per cent growth, so do not bank on it; run the numbers for your own situation.
The bottom line: LMI is not inherently good or bad. It is a tool. The right call depends on your deposit, your local market and how fast you can save. Model both scenarios with our LMI calculator, then have a mortgage broker run the real numbers for your circumstances.
Frequently Asked Questions
What is LMI in Australia?
Lenders Mortgage Insurance is a one-off premium that protects the lender, not you, if you default on your home loan. It applies when your deposit is under 20 per cent of the property value (LVR above 80 per cent). You pay it, but it covers the bank — typically $3,000 to $32,000+ depending on your loan and deposit.
How much does LMI cost?
LMI usually costs between $3,000 and $32,000+, depending on your deposit and the property price. On a $650,000 home, expect roughly $20,000–$22,000 at a 5 per cent deposit, $10,000–$15,000 at 10 per cent, and $4,000–$7,000 at 15 per cent. Exact premiums vary by lender and insurer.
How can I avoid paying LMI?
Seven ways: save a 20 per cent deposit; use the First Home Guarantee (5 per cent deposit, no LMI); use the Family Home Guarantee (2 per cent for single parents); get a professional LMI waiver; use a family guarantor; boost your deposit with the FHSS scheme; or use Keystart in WA. Most first home buyers qualify for at least one.
What is an LMI waiver?
An LMI waiver lets you borrow up to 90 per cent LVR (sometimes 95) without paying LMI. Select lenders offer it to lower-risk professions — doctors, lawyers, accountants, engineers, nurses and others. Waivers are rarely advertised and are usually accessed through a mortgage broker who knows which lenders currently offer them.
Do first home buyers have to pay LMI?
Not necessarily. First home buyers can avoid LMI through the First Home Guarantee (5 per cent deposit, no income caps or place limits since October 2025), Keystart in WA (2 per cent, no LMI), professional waivers, or a guarantor. Without one of these, LMI applies on any deposit under 20 per cent.
Can I get an LMI refund?
It depends on the insurer. If QBE insured your loan, you may get a partial refund on a sliding scale if you fully discharge it early, with the most available in the first 12 months. Helia (formerly Genworth) generally no longer offers refunds, only an internal discount if you refinance with the same lender. Ask your broker who the insurer was.
Is LMI tax deductible?
Yes, but only for investment properties, not your own home. LMI on an investment property is deductible over five years (or the loan term if shorter), which can offset a meaningful chunk of the cost for investors. Speak to your accountant about claiming it correctly.
Should I pay LMI or wait to save 20%?
It depends on your market. If prices in your area are rising, the cost of waiting (missed capital growth) can exceed the LMI premium, so buying sooner may pay off. If prices are flat or you are close to 20 per cent, waiting often wins. Have a broker model both with real numbers for your situation.
Do you pay LMI if you have a 20% deposit?
No. LMI only applies when your deposit is under 20 per cent — that is, when your loan-to-value ratio is above 80 per cent. At exactly 20 per cent or more, there is no LMI to pay, and you will often unlock better interest rates as well.
Can you get rid of LMI once your property is worth more than 20%?
No. Australian LMI is a one-off, non-refundable premium that does not cancel when your equity grows — unlike US-style PMI, which auto-cancels at a set equity threshold. Once you have paid LMI on a loan, rising equity will not refund or remove it. The only way to avoid the cost is before you settle.
How much is LMI on a 10% deposit?
On a 10 per cent deposit (90 per cent LVR), LMI is typically around $8,000–$13,000 on a $500,000 home and $10,000–$15,000 on a $650,000 home. These are estimates — your actual premium depends on the lender, the insurer and your loan details. A professional waiver or guarantor can remove the cost in this band.
Do you pay LMI again when you refinance?
Yes, if you refinance to a new lender while still borrowing above 80 per cent LVR, you generally pay fresh LMI — it does not transfer between lenders and there is no grandfathering. You avoid it if you refinance at 80 per cent LVR or below, or stay with your current lender without increasing your borrowing.
