LMI is one of the most misunderstood costs in Australian property buying. Most first home buyers assume it protects them if something goes wrong. It doesn't. Lender's Mortgage Insurance exists solely to protect your bank — and you foot the bill.
When you borrow more than 80% of a property's value, your lender requires LMI because the risk of loss in a forced sale is higher. They take out insurance. You pay the premium. On a $750,000 purchase with a 10% deposit, that premium can be $12,000–$18,000.
This guide explains how it works, exactly what it costs, and — crucially — whether you can avoid it.
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What LMI Actually Is
When your LVR (loan-to-value ratio) exceeds 80%, your lender purchases insurance from one of two providers: Helia (formerly Genworth) or QBE. The premium is based on your loan amount and LVR. You pay it — either upfront at settlement or capitalised into your loan balance.
The insurer pays out to the lender only if you default and the property sells for less than the outstanding loan balance. In rising markets, this rarely happens — but lenders still require LMI above 80% LVR as a matter of policy.
What Does LMI Actually Cost?
| Property Price | 10% Deposit (90% LVR) | Approx. LMI | 5% Deposit (95% LVR) | Approx. LMI |
|---|---|---|---|---|
| $500,000 | $50,000 | ~$8,000 | $25,000 | ~$15,000 |
| $650,000 | $65,000 | ~$10,500 | $32,500 | ~$20,000 |
| $750,000 | $75,000 | ~$12,500 | $37,500 | ~$23,500 |
| $900,000 | $90,000 | ~$15,000 | $45,000 | ~$28,500 |
| $1,000,000 | $100,000 | ~$16,500 | $50,000 | ~$32,000 |
Estimates only. Actual premiums vary by lender and insurer. Some lenders absorb part of the cost; others pass it on in full.
When capitalised, LMI grows. A $15,000 premium added to a 30-year loan at 6.2% adds roughly $31,000 in total repayments. The earlier you pay it off, the less it costs you overall.
5 Ways to Avoid LMI in 2026
1. First Home Guarantee (5% Deposit, Zero LMI)
The government guarantees 15% of your loan to the lender, so no LMI is required. You only need a 5% deposit. 35,000 places are available nationally each year.
- Single applicants: income up to $125,000/year
- Couples: combined income up to $200,000/year
- Sydney property price cap: $900,000 (2025–26)
- Must be owner-occupier (not investment)
- Must be a first home buyer (or meet re-entry criteria)
2. Guarantor Loan
A parent or close family member uses equity in their own property to guarantee part of your loan — usually enough to bring your effective LVR below 80%. No LMI required, even if your deposit is under 20%.
The guarantee is released once you've paid down enough of the loan (typically when the LVR drops below 80% through repayments or property value growth). Not all lenders offer guarantor products — work with a broker to find the right one.
3. Professional Occupation Waiver
Several lenders waive LMI for low-risk professional borrowers, typically up to 90% LVR. Qualifying occupations include:
- Doctors, dentists, specialists, pharmacists
- Lawyers, barristers, solicitors
- Accountants (CPA/CA qualified)
- Some engineers and IT professionals (lender-dependent)
Income thresholds apply — usually $150,000+ depending on the lender. If you're in a qualifying profession, this can save you tens of thousands.
4. Lender No-LMI Products
Some banks have introduced their own no-LMI products for borrowers with 10–15% deposits and strong credit profiles. These typically carry slightly higher rates in exchange — run the numbers carefully before assuming you're better off. A broker can compare the total cost of a no-LMI product vs paying LMI at a lower rate.
5. Save to 20%
The original path. Slower, but clean. In Sydney's market, where prices can move faster than savings, the trade-off is real: sometimes paying LMI and buying sooner is the financially better outcome.
LMI vs No-LMI: A Worked Example
| Scenario | Deposit | LMI Cost | Purchase Price | Total Cash Needed |
|---|---|---|---|---|
| Pay LMI, buy now (10% deposit) | $75,000 | $12,500 | $750,000 | $87,500 + stamp duty |
| Wait 18 months, save to 20% | $158,000 (20% of $790K) | $0 | ~$790,000 (+5.3%) | $158,000 + stamp duty |
Waiting costs ~$70,000 more in deposit to avoid $12,500 LMI — and locks out 18 months of equity growth. Every situation is different, but blind LMI avoidance isn't always smart.
Frequently Asked Questions
our broker team has helped hundreds of Sydney first home buyers navigate LMI, the First Home Guarantee, and guarantor options. Call 0432 634 648 to find out which LMI avoidance path applies to you.
Related: First Home Buyer Guides
Can you avoid LMI on your purchase?
There are 5 paths — and most buyers qualify for at least one. Free 15-min call with our broker team.
Call 0432 634 648