Glossary · Australian property
Lenders Mortgage Insurance (LMI).
A one-time insurance premium charged when borrowing more than 80% of property value, protecting the lender against default loss.
LMI is paid by the borrower but insures the lender. When LVR exceeds 80%, lenders require LMI to underwrite the loan. The premium is added to the loan or paid upfront at settlement. Either way it's a real cost.
Premium scales non-linearly with LVR plus loan size. Typical premiums: 85% LVR ≈ 1.5-2% of loan; 90% LVR ≈ 2-3%; 95% LVR ≈ 3.5-5%. On a $630K loan at 90% LVR, expect $15K-$19K LMI.
Avoidance: save 20% deposit (no LMI), use Home Guarantee Scheme (federal government guarantees 15% for eligible FHBs only), or use a family-guarantor structure. Whether LMI is 'worth it' depends on capital growth: in a market rising 5%+/year, paying $15K LMI to buy 12 months earlier saves more than the premium in property appreciation.
Source
Industry standard; LMI providers (Genworth, QBE) publish rate cards.
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