Lenders Mortgage Insurance (LMI) is one of the most misunderstood costs in home lending, partly because of who it actually protects.

LMI protects the lender, not the borrower

LMI covers the lender's loss if a borrower defaults and the property sale doesn't cover the outstanding loan. It's not insurance for you, even though you're the one who pays for it — an important distinction that surprises a lot of first-time buyers.

When it typically applies

LMI is generally required when your LVR is above 80%, meaning your deposit is less than 20% of the property value. Some government schemes and lender-specific policies can reduce or waive this requirement in certain circumstances.

How it's usually paid

LMI is typically a one-off premium, often added to the loan amount rather than paid upfront, which means you pay interest on it over the life of the loan. The exact cost depends on your LVR, loan size and lender — figures worth getting as part of a personalised quote.

Chris Brown

Chris Brown

Managing Director & Finance Broker at New Vision Financial Services, a credit representative under Australian Credit Licence 384704 and a member of the FBAA and AFCA. More about Chris →

General information only. This article is general in nature and doesn't take into account your personal financial situation, objectives or needs. It isn't tax, legal or financial advice. Lending criteria, product availability and policies vary between lenders and are subject to change — always confirm current detail with your broker before making decisions.

Frequently asked

Can LMI be avoided?

The most common way is a deposit of 20% or more. Some borrowers may also qualify for a government guarantee scheme or a professional waiver, depending on eligibility — a broker can check what applies to you.

Is LMI refundable if I refinance?

Some lenders offer a partial refund of LMI if you refinance within the first year or two, though this varies significantly by lender and policy — check before assuming it applies.

Does LMI protect me if I can't make repayments?

No — LMI protects the lender, not the borrower. If you're worried about your ability to meet repayments in future, that's a separate conversation about income protection or loan structure, not LMI.