⚡️⚡️⚡️
With energy prices rising, switch to a cheaper plan
💡
Compare Prices Now
⚡️⚡️⚡️

Lenders mortgage insurance (LMI)

Lenders charge LMI if you have a low deposit. You can avoid LMI by saving a bigger deposit or using a guarantor, and you can even borrow the LMI premium along with your loan.

We’re reader-supported and may be paid when you visit links to partner sites. We don’t compare all products in the market, but we’re working on it!

Lenders mortgage insurance (LMI) can be expensive: If you bought a $600,000 house with a 5% deposit of $30,000 then your LMI premium could cost over $22,000 (based on Finder's LMI estimator).

You can avoid or reduce your LMI costs by saving a larger deposit or using a parental guarantor to cover part of your deposit. Eligible first home buyers can use the First Home Loan Deposit Scheme to avoid LMI completely. And you can also borrow the LMI premium by folding into your loan.

  • LMI is protection for your lender, not for you. LMI doesn't cover you if you miss repayments due to illness or job loss. Mortgage protection insurance covers you in these situations.

How much is lenders mortgage insurance?

The amount you pay for lenders mortgage insurance depends on the size of your loan and deposit. If you're getting a low deposit home loan, you'll need to estimate your potential LMI costs and factor them into your total home-buying expenses.

LMI premium estimates

Here are some LMI premium estimates made using Finder's LMI calculator. These estimates can give you a quick idea of just how expensive lenders mortgage insurance can be.

Property valueDeposit ($)Deposit (%)Estimated LMI cost*
$400,000$20,000
$40,000
$60,000
5%
10%
15%
$12,711
$6,742
$3,294
$600,000$30,000
$60,000
$90,000
5%
10%
15%
$22,788
$11,772
$5,941
$800,000$40,000
$80,000
$120,000
5%
10%
15%
$34,982
$17,042
$9,064

*These costs are estimates only, taken from Finder's LMI premium estimate calculator. These numbers do not reflect genuine LMI quotes from an insurer.

Minimise your LMI costs with a larger deposit

As the examples above show, LMI can add thousands of dollars to the cost of buying a home. The cost of your property and the size of your deposit determine your LMI costs. If buying the same property, a borrower with a 15% deposit pays less LMI than a borrower with a 5% deposit.

How do I pay my lenders mortgage insurance premium?

Borrowers usually pay LMI during settlement, when your lender provides the funds for your loan and you take possession of the property. This means you can pay your lenders mortgage insurance in a lump sum upfront.

But there is another option: You can capitalise the premium, which means you add the premium to your loan. For this to happen, you'll need to borrow your LMI costs along with your loan amount, so that you're paying it off over time.

How does LMI capitalisation work?

  • You buy a $600,000 property.
  • You borrow $560,000.
  • Your LMI premium is around $22,000.
  • You capitalise the premium and borrow $575,000.
  • Your loan with your LMI premium included adds an extra $61 a month to your home loan repayments.

How to avoid LMI

LMI is a big expense and something that borrowers prefer to avoid. However, it's important to remember that without lenders mortgage insurance, many first home buyers would be locked out of the real estate market for years as they struggle to save 20% deposits.

There are ways to avoid paying LMI, or at least to minimise how much it costs you:

  • Use the First Home Loan Deposit Scheme. If you are a first home buyer, the First Home Loan Deposit Scheme may allow you to buy a property with a 5% deposit without paying lenders mortgage insurance. Eligibility depends on where you are buying, your income and the value of the property you are buying.
  • Leverage your employment. Some banks and lenders may offer an LMI waiver if you earn a high salary and you have a solid employment history working as a professional in specific industries. Some professionals who may qualify for LMI waivers include doctors and other medical professionals, accountants, actuaries, solicitors and entertainment industry professionals.
  • Keep your loan to value ratio (LVR) below 80%. If you have a 20% deposit (which is an LVR of 80%), you don't have to pay LMI. If you can buy in a more affordable area where your deposit stretches further, or find cheaper co-living arrangements for 12 months to save money, you may be able to build a bigger deposit and avoid paying LMI.
  • Take out a family guarantee. A family guarantee or family pledge is when one of your family members guarantees part of your loan with their own property. They can nominate how much to pledge and this is then added to your deposit amount.
  • Buy in partnership with someone. If you want to get on the property ladder sooner and you don't have a 20% deposit on your own, you could partner with a sibling or friend and buy as a joint venture. This way you both contribute to the deposit and you lower your risks and financial obligations.

QBE and Genworth are the 2 biggest LMI insurers in Australia. Some lenders provide their own LMI. It's not really possible to compare lenders mortgage insurance providers because lenders generally have an exclusive agreement with 1 insurer.

Can I get a refund on my premiums?

Man using a calculator.

Probably not. If you're exiting your home loan and have repaid it within 2 years of settlement, it might be possible to get a partial refund, depending on your lender. This option was more common prior to LMI changes in 2012, and it may no longer be possible. However, it's always worth asking the question as your lender or mortgage insurer may have a unique policy that allows a partial refund.

To request a refund, contact your lender and tell them that you'd like to apply for an LMI refund. They will then notify you of the process and the next steps required. You may need to put forward a written request.

LMI providers

Many lenders handle LMI with their own insurance products. These have different names depending on the lender. Many other lenders rely on 1 of 2 large lenders mortage insurers: Genworth and QBE.

Genworth

Genworth

Genworth is an LMI insurer that is majority owned by Genworth Financial, a US-based insurer. They provide LMI services to more than 100 lenders in Australia.

QBE

QBE-logo

QBE provides a range of insurance products across the globe. To consumers in Australia, they provide personal insurance covering your car, home, travels and more. They also handle workers compensation and a range of other related services.

More questions about lenders mortgage insurance

Compare low deposit home loans

$
years
Name Product Comparison Rate Fees Monthly Payment

loans.com.au Green Home Loan
Principal & interestOwner-occupier10% min. deposit
Principal & interestOwner-occupier10% min. deposit
Interest Rate
3.63%
4.05%
  • Application: $0
  • Ongoing: $0 p.a.
$686

Greater Bank Great Rate Discount Variable with Family Pledge Home Loan
Principal & interestOwner-occupier-10% min. deposit
Principal & interestOwner-occupier-10% min. deposit
Interest Rate
3.29%
3.30%
  • Application: $0
  • Ongoing: $0 p.a.
$658

HSBC Home Value Loan
Principal & interestOwner-occupier10% min. deposit
Principal & interestOwner-occupier10% min. deposit
Interest Rate
3.37%
3.38%
  • Application: $0
  • Ongoing: $0 p.a.
$664
$3,288 refinance cashback offer
Eligible refinancers borrowing $250,000 or more can get a $3,288 cashback. Terms and conditions apply.

loans.com.au Green Home Loan
Interest onlyOwner-occupier10% min. deposit
Interest onlyOwner-occupier10% min. deposit
Interest Rate
3.63%
4.08%
  • Application: $0
  • Ongoing: $0 p.a.
$686

Tic:Toc Live in Loan Variable Rate
Principal & interestOwner-occupier10% min. deposit
Principal & interestOwner-occupier10% min. deposit
Interest Rate
3.09%
3.10%
  • Application: $0
  • Ongoing: $0 p.a.
$641
loading

Compare up to 4 providers

Aussie Home Loans Logo

Enter your details and get a free consultation with an expert broker from Aussie.

By submitting this form, you agree to the Finder Privacy and Cookies Policy and Terms of Use

Applications are subject to approval. Conditions, fees and charges apply. Please note that you need to be an Australian citizen or permanent resident to apply.

Credit services for Aussie Select, Aussie Activate and Aussie Elevate products are provided by AHL Investments Pty Ltd ACN 105 265 861 (“Aussie”) and its appointed credit representatives, Australian Credit Licence 246786. Credit for Aussie Select products is provided by Residential Mortgage Group Pty Ltd ACN 152 378 133, Australian Credit Licence 414133 (“RMG”). RMG is a wholly-owned subsidiary of the Commonwealth Bank of Australia ABN 48 123 123 124 AFSL and Australian Credit Licence 234945. Credit for Aussie Activate products is provided by Pepper Finance Corporation Limited ACN 094 317 647 (“Pepper”). Pepper Group Limited ACN 094 317 665, Australian Credit Licence 286655 acts on behalf of Pepper. Credit services for Aussie Elevate products are provided by AHL Investments Pty Ltd ACN 105 265 861 Australian Credit Licence 246786 (“Aussie”) and its appointed credit representatives. Aussie is a trade mark of AHL Investments Pty Ltd ABN 27 105 265 861. Credit and any applicable offset accounts for Aussie Elevate are issued by Bendigo and Adelaide Bank Limited ABN 11 068 049 178 AFSL / Australian Credit Licence 237879.

Aussie is a trade mark of AHL Investments Pty Ltd. Aussie is a subsidiary of the Commonwealth Bank of Australia ABN 48 123 123 124. ©2020 AHL Investments Pty Ltd ABN 27 105 265 861 Australian Credit Licence 246786.

By submitting this form, you agree to the Aussie privacy policy.

After entering your details a mortgage broker from Aussie will call you. They will discuss your situation and help you find a suitable loan.

  • A comparison of home loans from multiple lenders.
  • Expert guidance through the entire application process.
  • Free suburb and property reports.

Aussie Home Loans Lender Logos

The Adviser’s number 1 placed mortgage broker 8 years running (2013-2020)

Image: Shutterstock

More guides on Finder

Home Loan Offers

Important Information*

Find the right home loan now

Ask an Expert

You are about to post a question on finder.com.au:

  • Do not enter personal information (eg. surname, phone number, bank details) as your question will be made public
  • finder.com.au is a financial comparison and information service, not a bank or product provider
  • We cannot provide you with personal advice or recommendations
  • Your answer might already be waiting – check previous questions below to see if yours has already been asked

Finder only provides general advice and factual information, so consider your own circumstances, or seek advice before you decide to act on our content. By submitting a question, you're accepting our Terms of Use, Disclaimer & Privacy Policy and Privacy & Cookies Policy.

20 Responses

  1. Default Gravatar
    PeterJune 7, 2017

    If I make a lump sum to my loan which will bring me under 80%, would I be able to have the LMI stopped? Will the bank keep the remaining amount owing in insurance or cancel the remaining, as it was put into the total amount of the loan?

    • Default Gravatar
      JonathanJune 8, 2017

      Hi Peter!

      Thanks for the comment.

      It would depend on how the LMI was agreed to be paid in your loan. If it was paid upfront and had been more than two years from settlement, you may not be able to recoup the said amount or at least the whole of it. But if it is included on your loan repayments, it may be recomputed by the LMI insurers.

      You can contact your lender or mortgage insurer as this is reviewed on a case-to-case basis.

      Hope this helps.

      Cheers,
      Jonathan

  2. Default Gravatar
    ianJune 16, 2016

    I have had finance approved,my lender(suncorp) will not allow me to pay for the lmi up front is this correct

    • Default Gravatar
      JodieJune 16, 2016

      Hi Ian,

      Thank you for contacting finder.com.au, a financial comparison website.

      Each lender has their own restrictions on how they handle LMI, if you would prefer to pay the LMI upfront you will need to discuss this with Suncorp directly or you can look at another lender that will allow for upfront payment of LMI.

      There has not been any regulation changes regarding LMI, you might be best to contact a mortgage broker who can offer you a range of lenders that can assist you with your specific needs.

      Regards
      Jodie

  3. Default Gravatar
    DavidMay 29, 2016

    I am buying a house with my 2 children who are both employed, I will be selling my house for approx $720.000 and buying the new house for $1m.I will be putting in $500.000 and the other half will be equally shared by my two children $250.000 each.
    We have been approved finance, but now they require us to pay LMI insurance, as I am paying half the loan up front, do we have to pay this cost ? or can I refuse to pay it ?
    Regards
    David

    • Avatarfinder Customer Care
      MarcMay 30, 2016Staff

      Hi David,
      thanks for the question.

      LMI is required as a condition of finance with most lenders, so if a lender requires a borrower to pay LMI then they will have to in order to obtain a loan from them.

      I hope this helps,
      Marc.

  4. Default Gravatar
    JeshuaAugust 3, 2015

    I recently enquired about a housing loan and was advised that as of last week LMI is no longer able to be capitalised onto the principal of the loan, meaning that I have to come up with the LMI and a deposit before I can get a loan.

    I am not sure if this is for this particular lending organisation or if it is actually now a legal requirement. Everything I find on the internet advises that LMI can still be capitalised.

    Can you please advise me on the current situation in Australia?

    • Default Gravatar
      JodieAugust 4, 2015

      Hi Jeshua,

      Thank you for contacting finder.com.au, a financial comparison website.

      Each lender has their own restrictions on how they handle LMI, there are still lenders who would allow LMI to be capitalised into the loan amount depending on your circumstances.

      There has not been any regulation changes regarding LMI, you might be best to contact a mortgage broker who can offer you a range of lenders that can assist you with your specific needs.

      Regards
      Jodie

  5. Default Gravatar
    MohanMay 27, 2015

    I have taken an LMI for a $216,000 loan for a property Purchased at $271,000, but the bank only valued at $235,000.

    The cost of my LMI is $4,847.

    Can you advise if I were to refinance after a period of 6 months and I do not need a LMI, how do I calculate the LMI reimbursement amount.

    • Avatarfinder Customer Care
      MarcMay 29, 2015Staff

      Hi Mohan,
      thanks for the question.

      The amount you’re reimbursed for will be worked out by the insurer used by your lender. I would recommend contacting them to find out how much you could receive back.

      Cheers,
      Marc.

Go to site