What Is Lenders Mortgage Insurance (LMI) and How Can You Avoid It?
When buying a home, you might hear the term Lenders Mortgage Insurance, commonly known as LMI. Many buyers are unsure what it is, why it exists, and how they can avoid paying it.
Here’s a simple breakdown to help you understand LMI and how it affects your home loan.
What Is LMI?
Lenders Mortgage Insurance is a one-off fee charged by lenders when your deposit is less than 20% of the property value.
It protects the lender (not the borrower) in case you are unable to repay the loan.
Even though it protects the bank, you pay for it.
When Do You Have to Pay LMI?
You will usually pay LMI if:
- Your deposit is below 20%
- You are considered higher risk by the lender
- You are applying for a low-deposit loan (5–10%)
The exact cost depends on:
- Your deposit amount
- Property price
- Loan amount
- Your lender’s LMI provider
For some buyers, LMI can be $8,000–$20,000+ depending on the loan size.
Can You Avoid Paying LMI?
Yes — there are several ways to avoid or reduce LMI.
1. Save a 20% Deposit
The most direct way.
If your deposit reaches 20%, LMI is automatically waived.
2. Use a Government Scheme (2% or 5% Deposit, No LMI)
Some schemes allow you to buy with low deposit and NO LMI, such as:
- First Home Guarantee (FHBG) – 5% deposit
- Family Home Guarantee (FHG) – 2% deposit
- Regional First Home Buyer Guarantee – 5% deposit
These schemes can save you thousands in fees.
3. Apply for an LMI Waiver (Certain Professions)
Some lenders offer LMI waivers for high-earning professionals such as:
- Doctors
- Dentists
- Lawyers
- Accountants
- Engineers
- Certain medical specialists
These waivers often allow buying with 10% deposit, no LMI.
4. Use a Family Guarantee
A parent can use equity in their home as security.
This can boost your deposit to 20% and remove LMI altogether.
5. Choose a Lender With Lower LMI Fees
Not all LMI providers cost the same.
As your mortgage broker, we compare lenders and show the cheapest options.
Should You Pay LMI or Avoid It?
Sometimes paying LMI is actually worth it if it helps you:
- Buy sooner
- Enter a rising market
- Avoid increasing rents
- Secure a property before prices increase further
You should compare the cost of LMI vs. the cost of waiting another year.
Kickstart Finance Group Can Help You Minimise LMI
We assess your situation and find the smartest way to lower or avoid LMI, including:
- Low-deposit lenders
- LMI waivers
- Government schemes
- Family guarantor options
- Strategies to boost your borrowing power
📞 0422 905 666
📨 info@kickstartfinancegroup.com.au