What is LMI and how much does it cost?

LMI insures the lender (not the borrower) against default loss. Banks underwrite 95% LVR loans on the assumption that LMI will cover any shortfall if you default and the property sells for less than the outstanding loan. The premium is added to the loan or paid upfront at settlement.

Cost is non-linear with LVR + loan size. Typical LMI premiums: 85% LVR = ~1.5-2% of loan, 90% LVR = 2-3%, 95% LVR = 3.5-5%. On a $630K loan (90% LVR on $700K purchase), expect $15,000-$19,000 LMI. Different insurers (Genworth, QBE) have slightly different rate cards; brokers can shop.

Avoidance options: (1) save 20%+ deposit, eliminates LMI entirely. (2) Home Guarantee Scheme, federal government guarantees 15% of the loan, removing LMI for eligible first home buyers + key worker buyers + single parents (with property + income caps). (3) Family guarantor structure, a parent's property serves as security for the deposit shortfall, removing LMI but with risk to the guarantor.

Whether LMI is 'worth it' depends on capital growth: in a market growing 5%+ per year, paying $15K LMI to enter 12 months earlier saves you 12 months of property-price appreciation (~$35-50K on a $700K asset). In a flat market, LMI is dead cost. Run our buying-power calculator at /tools/buying-power for the LMI vs wait-and-save trade-off.