What is Lenders Mortgage Insurance (LMI)?

What is LMI and how does it work?

Lenders Mortgage Insurance is a one-off insurance premium you pay when you borrow more than 80% of a property’s value. It does not protect you. It protects your lender against the risk of financial loss if you default on the loan and the sale of the property does not cover what you owe.

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Here is the detail that frustrates most buyers: you pay the premium, but you receive none of the benefit. If you default and the property sells for less than the outstanding loan, the LMI insurer pays the shortfall to the lender. The insurer then pursues you to recover that amount. You are still liable.

LMI is triggered the moment your loan-to-value ratio (LVR) exceeds 80%. On a $750,000 property, that is any deposit below $150,000. The fee is paid once, either at settlement or added to your loan. There are two main LMI providers in Australia: Helia (formerly Genworth) and QBE. Your lender chooses the insurer. You have no say, and rates differ between providers, which is why the same loan at two different banks can produce meaningfully different LMI costs.

How much is LMI on a 5% deposit?

On a 5% deposit (95% LVR), LMI is at its highest. On a $500,000 property expect to pay between $14,000 and $18,000. On a $750,000 property, between $24,000 and $28,000. On a $1,000,000 property, between $38,000 and $42,000. Through the First Home Guarantee, eligible buyers with a 5% deposit pay zero LMI.

At 95% LVR, you are borrowing the maximum proportion of the property value, which represents the highest risk for the lender and therefore the highest LMI premium on the tiered scale. Both your LVR and your total loan size influence the cost, which is why LMI on a $1,000,000 loan is not simply twice the cost of LMI on a $500,000 loan. It is considerably more.

Indicative estimates based on 2026 Helia and QBE owner-occupied rates. Actual LMI varies by lender, insurer, loan product, and individual circumstances. State stamp duty on the LMI premium is not included above.

How much is LMI on a 10% deposit?

At 10% deposit (90% LVR), LMI drops significantly compared to a 5% deposit. On a $750,000 property, the estimate falls to $12,000 to $16,000. On a $500,000 property, approximately $7,500 to $10,000. The difference between a 5% and 10% deposit can save you $12,000 to $17,000 in LMI on a mid-range property.

Whether saving an extra 5% is worth the additional time depends on how fast property prices are moving in your market. In a rising market, the property growth during an additional 12 to 18 months of saving often exceeds the LMI saving. In a flat or declining market, the calculation tips the other way. A broker can model both scenarios with your specific numbers.

Note also that most states charge stamp duty on the LMI premium itself. In Queensland, for example, that adds approximately 9% to the gross LMI cost. On a $20,000 LMI premium, that is an additional $1,800 that does not appear in most online calculators.

How much is LMI on an $800,000 house?

On an $800,000 property with a 5% deposit (95% LVR), LMI typically costs between $26,000 and $34,000 in 2026. At a 10% deposit (90% LVR), the estimate drops to approximately $13,000 to $17,000. Through the First Home Guarantee, an eligible buyer pays zero LMI on an $800,000 property with just a 5% deposit.

An $800,000 purchase sits above the price cap for some states under the First Home Guarantee (Adelaide and Perth are capped at $850,000, which still covers this price) and well within Brisbane at $1,000,000 and Sydney at $1,500,000. If you are buying in a capital city at this price and you are a first home buyer, it is worth checking your Guarantee eligibility before assuming LMI is unavoidable.

Can LMI be added to my home loan?

Yes. Most Australian borrowers capitalise LMI into their loan balance rather than paying it upfront at settlement. This means the LMI premium is added to the total amount you borrow, and you pay interest on it for the life of the loan. The long-term cost is significantly higher than the quoted premium figure.

• ✓You can capitalise LMI — it is added to your loan balance on day one
• ✓You can also pay LMI upfront as a lump sum at settlement
• ✗Capitalising increases your total loan amount and you pay interest on the LMI premium for the full loan term
• ✗A $25,000 LMI premium capitalised at 6% over 30 years costs approximately $53,900 in total

Paying LMI upfront at settlement avoids this compounding interest entirely but requires cash you may want to hold as a buffer for immediate repairs, rate changes, or life events. Neither option is universally correct. Discuss both with your broker before choosing.

How to avoid LMI in Australia

There are four established ways to purchase a home in Australia without paying LMI: save a 20% deposit; apply for the First Home Guarantee; use a family guarantor loan; or qualify for a profession-specific LMI waiver. Each path has different eligibility requirements, timelines, and trade-offs.

First Home Guarantee Scheme — no LMI eligibility

The First Home Guarantee allows eligible first home buyers to purchase with a 5% deposit and pay zero LMI. The government guarantees up to 15% of the property value, covering the gap between your 5% deposit and the 20% threshold that would normally trigger LMI. From 1 October 2025, there are no income caps and no annual place limits.

This is the single most valuable scheme available to Australian first home buyers in 2026. On a $750,000 purchase, eliminating LMI saves approximately $24,000 to $28,000 in upfront costs, and tens of thousands more in interest if that premium would otherwise have been capitalised.

To be eligible you must be purchasing your first home, be an Australian citizen or permanent resident, intend to live in the property as your primary residence, and have a minimum 5% genuine deposit. The property must fall within the relevant price cap for your location.

Is LMI refundable if I pay off my loan early?

No, in the vast majority of cases LMI is strictly non-refundable. While a small number of lenders maintain arrangements allowing a partial refund if the loan is fully repaid within the first 12 months, Australia’s largest LMI providers have largely moved away from early-repayment refunds. The rules vary by insurer and by the specific lender arrangement and are never processed automatically.

• ✗Helia: No longer offers cash refunds for early loan termination. Helia only provides a premium credit if you undertake an internal refinance, meaning you stay with the same lender and restructure the loan.
• ~QBE: A partial refund of approximately 40% may apply if the loan is fully repaid within 12 months, the refund exceeds $500, and the loan was never in arrears. After 12 months the window is generally closed. The exact arrangement depends on your specific lender’s agreement with QBE.
• ✗CBA and others: Several major lenders have corporate arrangements where LMI is 100% non-refundable from day one regardless of how quickly the loan is repaid.
• ✗Never automatic: You must contact your lender directly when the loan closes and ask whether a refund applies to your specific contract.

Because LMI policies are legal agreements between the bank and the insurer, your only avenue for a refund is through your lender. Ask your broker to confirm the exact refund policy before you commit, particularly if you expect to sell or refinance within the first year.

Does LMI transfer if I switch lenders?

No. LMI is not transferable between lenders. Each lender has an independent arrangement with its chosen insurer. If you refinance to a new lender and your LVR is still above 80%, you may need to pay a new LMI premium at that lender’s rate, in addition to any other refinancing costs.

• ✗Each lender has an independent arrangement with its own LMI insurer
• ✗Refinancing while your LVR is above 80% may trigger a new LMI premium at the new lender
• ✓If your property has grown in value and your LVR is now below 80%, no LMI applies at the new lender

This is one of the most underappreciated costs of refinancing in the early years of a loan. Before switching, calculate your current LVR. If your property has grown in value or you have made significant repayments, you may now be below 80% LVR and no longer subject to LMI at all. Your broker can run this calculation for you before you commit to anything.

Can I use a personal loan to pay my LMI?

No. A personal loan cannot be used to fund LMI or a home deposit. Lenders require genuine savings, which means funds held in your own name for at least three months. A personal loan does not satisfy this requirement, and the repayments significantly reduce your assessed borrowing capacity. Applications structured this way are typically declined.

• ✗Lenders require genuine savings held in your own name for at least 3 months
• ✗A personal loan does not count as genuine savings under any lender’s policy
• ✗Personal loan repayments significantly reduce your assessed borrowing capacity

Beyond the practical rejection risk, using a personal loan to cover a deposit or LMI increases your total debt significantly at exactly the moment you are taking on a mortgage. The combined repayments can put you into financial stress immediately after purchase, which is the opposite of what LMI was supposed to help you manage.

If you are short on genuine savings, the right paths are the First Home Guarantee (5% deposit, no LMI), the First Home Super Saver Scheme (access voluntary super contributions as a deposit), or a family guarantor arrangement. All three are structured to work within genuine savings requirements.