Understanding Lenders’ Mortgage Insurance with QBE

Lenders' Mortgage Insurance (LMI) can be the difference between buying a house today or waiting years as you save a bigger deposit.

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Richard Whitten

Updated

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Lenders' Mortgage Insurance (LMI) can come as a surprise cost for Australian home buyers with low deposits.

But it can also let you enter the property market without saving a 20% deposit, making LMI a great option for many first time buyers.

Discover more about LMI with QBE

Opting to use LMI can also speed up the buying process. You don't need to save up a huge deposit, which can make it easier for you to get onto the property ladder or buy your dream home.

You're also still able to have lender choice, even if you use LMI. And you're still able to choose a loan that suits your needs.

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What is lenders' mortgage insurance?

Lenders' mortgage insurance is a type of insurance that protects the financial institution providing you with a home loan.

If you're borrowing more than 80% of the purchase price of your home, you'll probably need to pay LMI.

Today, in Australia, many first home buyers need to pay LMI. Some people looking to upgrade their current home or grow their investment portfolio will also pay LMI, too, though it's less common.

You can find an FAQ guide to LMI on the QBE website, too.

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Learn more about LMI and home loans

How LMI works

Most lenders want a borrower to save a 20% deposit. If you're buying a home that costs $800,000, that means you'd need a deposit of $160,000.

But some lenders will happily accept a borrower with a 10% deposit. If that's the case, you could buy an $800,000 home with just $80,000. That's half the size of the 20% deposit and a much more realistic amount for many first home buyers.

In order to get a loan with a much lower deposit, your lender will charge you an LMI premium. While LMI is an additional cost when buying a property, it lets buyers enter the property market faster. That can be a great benefit for some buyers.

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Our expert says: LMI helped me benefit from growth in property value

"I paid LMI when I bought my first home, as I'd only saved a 10% deposit. At first I wasn't sure if I'd made the right decision - but then I worked out I’d be at least a few years off owning a home if I waited til I had 20%. I'm glad I purchased with LMI, as property prices increased, so I was able to benefit from the growth in value – which more than covered the cost."

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How can LMI help you purchase a home?

  • Allows you to borrow with a deposit of less than 20%

  • Lets you get a foot on the property ladder more quickly.

  • Enables you to spend less time saving and more time paying off your property.

Use the LMI calculator

The LMI calculator below will give you an idea of how much cost LMI can add to your loan. Input the amount you plan to borrow, along with the price of the property you're looking at purchasing. An estimation will work too, if you don't yet have the exact amounts.

Property value
$
Borrowing amount
$

Helpful articles for first home buyers

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Money Editor

Richard Whitten is Finder’s Money Editor, with over seven years of experience in home loans, property and personal finance. His insights appear in top media outlets like Yahoo Finance, Money Magazine, and the Herald Sun, and he frequently offers expert commentary on television and radio, helping Australians navigate mortgages and property ownership. Richard holds multiple industry certifications, including a Certificate IV in Mortgage Broking (RG 206) and Tier 1 and Tier 2 certifications (RG 146), as well as a Graduate Certificate in Communications from Deakin University. See full bio

Richard's expertise
Richard has written 594 Finder guides across topics including:
  • Home loans
  • Property
  • Personal finance
  • Money-saving tips

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