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Lenders Mortgage Insurance (LMI) in Australia
What LMI costs at each deposit level, why premiums step at LVR band edges, when capitalising beats paying cash, and the low-deposit paths that avoid a premium.
What the premium buys, and who it protects
A one-off insurance premium that protects the lender, not you, on loans written above its no-LMI loan-to-value ratio — 80% LVR for most owner-occupied lending. If the loan later defaults and the sale of the property does not clear the debt, the insurer pays the lender the shortfall and then has a right to recover that money from you. Paying LMI buys the lender’s willingness to lend at a higher LVR; it buys you no cover at all.
Three parties can carry that risk. Helia and QBE Lenders’ Mortgage Insurance are the two dedicated underwriters in the Australian market, and several large lenders self-insure instead, calling the charge a low-deposit premium or risk fee. You do not choose which route your loan takes — the lender does — and that explains most of the price variation borrowers find confusing.
What LMI costs at each deposit level
Premiums scale with the loan, so the dollar figure moves with the purchase price. On the estimator behind this site’s LMI calculator, an owner-occupier buying at $700,000 pays roughly $21,600 with a 5% deposit, about $12,300 with 10%, and about $5,100 with 15%. At $500,000 the same ladder runs roughly $16,200, $9,200 and $3,800. At $900,000 it is about $26,700, $15,200 and $6,200. These are market-level estimates rather than insurer quotes.
The detail that changes decisions is that premiums step at LVR band edges — 95%, 90%, 85%, 80% — instead of sliding smoothly. Moving from a 10% to a 15% deposit on a $700,000 purchase costs $35,000 in extra savings and removes roughly $7,200 of premium; the next $35,000 removes the remaining $5,100 and ends the charge entirely.
Insurance duty, and the other costs of a high LVR
LMI is an insurance product, so some states levy insurance duty on the premium itself. Victoria and Queensland typically apply it; New South Wales typically does not. At the rates those states apply to general insurance, duty on a $12,300 premium adds well over $1,000 that no national calculator shows you, payable whether you capitalise or not. Confirm the rate with your state revenue office.
A small deposit costs more than the premium alone. Above 80% LVR lenders commonly order a full valuation rather than a desktop one, apply postcode restrictions in single-industry towns and high-density apartment markets, and narrow the security types they accept. A file that passes comfortably at 80% can fail on the property alone at 90%.
Capitalising the premium versus paying cash
Most borrowers capitalise, meaning the premium is added to the loan and repaid with interest over the term. A $12,300 premium at 6.09% over 30 years costs about $74 a month and roughly $14,500 in interest if it is never paid down early — more than doubling what the insurance actually cost. Paying cash avoids that, but only if the cash is genuinely spare once duty, legals and a settlement buffer are covered.
Capitalising also has an LVR consequence people miss. Most lenders let the loan plus capitalised premium sit above the LVR cap by the amount of the premium, but not all do, and where the cap is hard you must find the cash or reduce the loan. Ask which treatment applies before you finalise your deposit.
The paths that avoid a commercial premium
The Australian Government 5% Deposit Scheme — the renamed First Home Guarantee — is the main alternative. Since 1 October 2025 there are no income caps and no cap on places, so there is no waitlist and no allocation to race for. Housing Australia guarantees up to 15% of the property value, removing LMI entirely for eligible first home buyers at a 5% deposit and eligible single parents or guardians at 2%. Apply only through one of the 30-plus participating lenders.
Price caps bind where income caps no longer do. From 1 October 2025 they are $1.5m in Sydney and $800,000 across the rest of NSW, $950,000 Melbourne and $650,000 regional Victoria, $1m Brisbane and $700,000 regional Queensland, $850,000 Perth and $600,000 regional WA, $900,000 Adelaide and $500,000 regional SA, $700,000 Hobart and $550,000 regional Tasmania, $1m across the ACT, and $750,000 in Darwin — lifted from $600,000 on 1 July 2026 — with $600,000 elsewhere in the Northern Territory.
Does paying LMI still make sense while values are falling?
This is the question worth asking in late 2026, and the usual argument for paying a premium does not hold. Cotality recorded a 0.9% national fall in August 2026, the fifth consecutive monthly decline, leaving values 3.6% below the March 2026 peak. Capitalise $21,600 of premium into a 95% LVR loan in that market and negative equity can arrive within months, closing off refinancing until values recover.
That does not make LMI wrong; it makes the deposit band the decision. Paying a premium to move from a 15% to a 10% deposit buys very little, while paying one to stop renting at a price you can service under the 3 percentage point buffer may still be rational. Every figure here is an estimate rather than a quote, and none of it is personal credit advice — Azure Home Loans can request binding premiums from the lenders whose insurer suits your LVR.
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FAQ
How much is LMI on a $700,000 house with a 10% deposit?
Roughly $12,300 for an owner-occupier on this site’s estimator, before any state insurance duty. The premium is driven by loan size and LVR band rather than by state, so the same 90% LVR loan prices similarly in Perth and in Sydney — what differs is the loan a 10% deposit produces in each market. Your lender’s insurer arrangement sets the binding number.
Can I get LMI refunded if I refinance early?
Sometimes, and only partially. Some insurer policies allow a partial refund on a sliding scale if the loan is repaid within the first year or two, but a large share of Australian policies now carry no refund at all. Ask for the specific insurer’s refund schedule before settlement — it is one of the few LMI terms you can check in advance.
Does a 20% deposit always avoid LMI in Australia?
Usually for standard residential lending, but not always. The 80% threshold is lender policy rather than law, and some lenders apply lower caps to serviced apartments, units under about 50 square metres, large rural residential blocks and non-resident applicants. A 20% deposit against security the lender dislikes can still attract a premium or a decline.
Is LMI negotiable?
Not in the way people hope. Premiums come from insurer rate tables indexed by loan amount and LVR band, and branch staff cannot discount them. What moves the number is structure: a slightly larger deposit to clear a band edge, a smaller loan, or a lender whose insurer prices your band more keenly.
Do I pay LMI again when I refinance?
If your LVR at the new lender is still above 80%, yes. LMI is not portable between lenders, so a high-LVR switch means a fresh full premium on the new loan while the original is not refunded. It is the main reason low-deposit borrowers stay put and negotiate on rate instead. With values 3.6% below the March 2026 peak, check your current LVR before assuming equity has built.
Is LMI tax deductible?
On an investment property generally yes, but as a borrowing expense rather than an immediate deduction — borrowing costs above $100 are typically claimed over five years or the loan term, whichever is shorter. On an owner-occupied home it is not deductible at all. Deductibility follows the purpose the borrowed money was put to, so confirm your position with an accountant.
Does paying LMI increase how much I can borrow?
No. LMI lets a lender advance a higher percentage of the property value; it does nothing to your serviceability. You are still assessed at your rate plus the 3 percentage point buffer APRA reconfirmed in May 2026, and capitalising the premium slightly increases the balance you service. A higher LVR without higher income is not a bigger approval.
What is the difference between LMI and mortgage protection insurance?
LMI protects the lender against a shortfall after a default. Mortgage protection insurance is a consumer product you buy to cover your own repayments if you lose income or fall ill. They are unrelated, sold by different parties, and paying one gives you nothing under the other. The similar names cause more borrower confusion than almost any other term in Australian lending.