Lenders Mortgage Insurance applies when your deposit is less than 20%. Find out exactly how much LMI could cost you — and how to avoid it.
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Lenders Mortgage Insurance is a one-off insurance premium that protects the lender — not you — if you default on your home loan and the property sells for less than the outstanding balance. Despite the name, LMI does not cover the borrower. You pay the premium, and if anything goes wrong, the lender claims against the policy.
LMI is required when you borrow more than 80% of the property value — in other words, when your loan-to-value ratio (LVR) exceeds 80%. The smaller your deposit, the higher your LVR, and the higher the LMI premium.
It's a one-off premium that can range from $5,000 to $40,000+ depending on your loan amount and deposit size. Most Australian lenders let you add LMI to your loan balance (capitalise it) rather than paying it upfront at settlement, which spreads the cost over the life of the loan — but means you pay interest on the LMI amount too.
For a full breakdown of how LMI works, read the NestPath LMI guide.
Lenders Mortgage Insurance protects the lender — not you — if you default on your home loan. It's required when your deposit is less than 20% of the property value (LVR above 80%). The cost varies dramatically based on your deposit size and property value.
Based on Westpac's LMI calculator and current 2026 industry rates (Money.com.au, Canstar):
| Property value | 5% deposit | 10% deposit | 15% deposit |
|---|---|---|---|
| $400,000 | ~$12,600 | ~$10,500 | ~$4,000 |
| $500,000 | ~$15,750 | ~$13,200 | ~$5,000 |
| $600,000 | ~$19,000 | ~$15,800 | ~$5,100 |
| $750,000 | ~$24,000 | ~$20,000 | ~$6,400 |
| $1,000,000 | ~$32,000 | ~$26,500 | ~$8,500 |
| $1,500,000 | ~$65,500 | ~$60,500 | ~$13,000 |
These are estimates based on a first home buyer profile, owner-occupier, 30-year loan, NSW property. Your actual LMI may vary by ±20% based on lender, insurer, employment status, and loan product. Use the calculator above for your specific scenario.
LMI typically costs 1–5% of the loan amount, with NAB capping their LMI at up to 6.5% of the loan. The two main LMI providers in Australia are Helia (formerly Genworth) and QBE, though some lenders self-insure (e.g. Pepper Money) or have alternative arrangements.
The Federal Government's expansion of the First Home Guarantee scheme has fundamentally changed the LMI landscape for first home buyers in 2026.
Under the expanded scheme, all eligible first home buyers can purchase with as little as 5% deposit and zero LMI — with no property value caps and no income caps. The government guarantees the additional 15% needed to reach a notional 20% deposit.
This is a meaningful shift. Previously, FHBG had property price caps (around $700K–$900K depending on city) and income caps ($125K single / $200K couple). The expansion removes both.
For a first home buyer purchasing a $600,000 property with a 5% deposit, the saving is approximately $19,000 in LMI that would otherwise apply.
Eligibility check:
Compare brokers who handle FHBG applications →
Beyond the expanded First Home Guarantee, four other paths to skip LMI exist:
Not sure which option applies to you? Ask a broker about LMI waivers — a good broker knows which lenders offer profession waivers, which accept the First Home Guarantee, and how to structure a guarantor loan.
One other cost to factor in before settlement: your lender will require proof of building insurance on the property before they release the loan. Premiums typically run $1,200–$2,500 per year — compare home insurance early so the certificate of currency is ready the moment your broker locks in your loan.
If you can't avoid LMI, three structural choices remain:
| Approach | Pro | Con | Best for |
|---|---|---|---|
| Pay LMI upfront | Lower total interest paid over loan life | Larger cash drain at settlement | Buyers with cash buffer beyond deposit |
| Capitalise into loan | Preserves cash at settlement | Pay interest on LMI for 25–30 years | Most FHBs (cash usually tight) |
| Wait + save 20% | Zero LMI, smallest loan | Property prices may rise faster than savings | Stable price markets only |
The “wait and save” path lost favour during the 2020–2022 property boom — buyers who waited paid significantly more in higher prices than they saved in LMI. In flatter 2026 markets, the calculus is closer. Talk to a broker before deciding.
Investment property LMI typically costs 20–30% more than owner-occupier LMI for the same LVR. Some lenders also cap maximum LVR at 90% for investment loans (vs 95% for owner-occupier).
The upside: LMI on investment loans is tax-deductible, claimed over five years (or the loan term, whichever is shorter). On a $25,000 LMI premium, that's roughly $5,000/year in deductions — at a 37% marginal rate, ~$1,850/year tax saved.
For first home buyers considering rentvesting (buying an investment property instead of primary residence), the tax-deductibility softens the LMI cost meaningfully — but you also forfeit the expanded First Home Guarantee, which is FHB primary-residence only.
For deeper detail on rentvesting trade-offs, see our negative gearing guide. For the mortgage repayment math on your loan with or without LMI, see our mortgage repayment calculator.
A NestPath vetted broker will model both paths — pay LMI now vs save longer — with your exact numbers. Free, no obligation.
LMI on a $500,000 property typically ranges from $7,000 to $20,000 depending on your deposit size. With a 15% deposit ($75,000), LMI is around $3,000–$5,000. With a 10% deposit ($50,000), it jumps to $7,000–$10,000. With a 5% deposit ($25,000), LMI can reach $15,000–$20,000. The smaller your deposit, the higher the premium.
Yes — save a 20% deposit, use the First Home Guarantee (5% deposit, no LMI), use a family guarantor loan, or check if your profession qualifies for an LMI waiver. Doctors, lawyers, accountants and some other professionals can borrow above 80% LVR without paying LMI at participating lenders.
Usually yes. Most Australian lenders let you capitalise LMI — the premium is added to your loan balance rather than paid as a lump sum at settlement. This makes the upfront cost easier to manage but means you pay interest on the LMI amount for the life of the loan. You can also choose to pay LMI upfront if you have the cash.
Not if you use the First Home Guarantee. Eligible first home buyers can purchase with just 5% deposit and pay zero LMI because the federal government guarantees the remaining 15%. Without the guarantee, first home buyers with a deposit under 20% pay LMI like any other borrower.
This calculator provides estimates only and should not be relied upon for financial decisions. LMI costs vary between lenders and insurers. Actual premiums may differ. NestPath is not a financial adviser — seek independent advice before making financial decisions.
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