Question 1

What is Lenders Mortgage Insurance (LMI)?

Accepted Answer

LMI is an insurance policy that protects the lender (not you) if you default on your loan and the property is sold for less than the outstanding loan amount. It's required when your deposit is less than 20% of the property's value — i.e. your LVR is above 80%. Despite protecting the lender, the cost is passed to you as the borrower.

Question 2

How is LMI calculated in Australia?

Accepted Answer

LMI is calculated as a percentage of the loan amount, with the rate depending on your LVR bracket and the size of your loan. Rates range from about 0.6% (LVR 80–85%, small loan) to over 4% (LVR 90–95%, large loan). The premium is then subject to stamp duty in most states (approximately 10%), which is added on top. Rates in this calculator are based on indicative Genworth / Arch MI published rates.

Question 3

Can I avoid paying LMI?

Accepted Answer

Yes. The primary way is to save a 20% deposit (LVR ≤ 80%). Other options include: using a guarantor (a parent or close relative uses their property equity to guarantee part of your loan, avoiding LMI entirely); accessing the First Home Guarantee (FHBG) scheme where the federal government guarantees 15% of your deposit so you only need 5% — this eliminates LMI; or some lenders offer LMI waivers for certain professions (doctors, lawyers, accountants).

Question 4

Can I add LMI to my loan?

Accepted Answer

Yes. Most lenders allow you to capitalise the LMI premium — add it to your loan balance rather than paying it upfront. This means you pay interest on the LMI amount for the life of the loan, increasing the total cost. For a $15,000 LMI premium on a 30-year loan at 6.5%, capitalising adds approximately $34,000 in total interest. Paying upfront (if you can afford it) is the cheaper option.

Question 5

Is LMI refundable if I pay down my loan quickly?

Accepted Answer

Generally no — LMI is a one-time premium and is not refundable if your LVR later drops below 80% through repayments or property value growth. However, if you refinance or sell the property, you may need to pay LMI again on the new loan if your LVR is still above 80%. Some lenders offer partial refunds if you repay within 2 years — check your specific policy.

Deposit	Amount	LVR	LMI premium
5%	$32,500	95%	$22,823
8%	$52,000	92%	$22,102
10%	$65,000	90%	$12,677
12%	$78,000	88%	$12,395
15%	$97,500	85%	$5,652
20%	$130,000	80%	No LMI

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