Lenders mortgage insurance (LMI) explained
Lenders mortgage insurance, or LMI, protects the lender, not you, if a home loan is not repaid. It usually applies once you borrow more than 80% of a property's value, and you, the borrower, pay the premium.
Lenders mortgage insurance protects the lender
You pay for it, but you are not the one it covers. Whether it applies turns on one number: how much you borrow against the property's value.
If a borrower cannot repay, the insurance covers the lender's loss. It does not protect your deposit, your credit report or your home.
It usually applies once you borrow more than 80% of the value. That percentage is your loan-to-value ratio, or LVR.
Value means the lower of the purchase price and the lender's own valuation. If the valuation comes in under the price, your LVR rises even though your deposit has not changed.
The premium is often charged as a one-off amount, and it can usually be added to the loan. Adding it means you borrow more and pay interest on that amount too.
We do not quote premiums, because they vary by insurer and lender. Ask your lender for an LMI quote before you commit.
The table shows the 20% deposit that usually avoids LMI at three example prices, the 5% deposit some buyers start with, and the gap between the two.
Three routes below 80%
Most buyers get past LMI in one of three ways. Each has its own conditions, and one check applies to all of them.
Questions about LMI?
Run your own figures in our home loan deposit calculator, or write to us. If you ask for help comparing home loans, we pass your details, with your consent, to a licensed mortgage broker.