How to avoid lenders mortgage insurance (LMI)
What LMI costs, and five legitimate ways to buy without paying it.
Key points
- LMI on a $750,000 home with a 5% deposit can be about $25,650.
- The 5% Deposit Scheme lets eligible first home buyers avoid LMI with no income cap.
- Price caps apply, from $500,000 in regional SA to $1.5 million in Sydney.
- A family guarantee or a professional waiver can also remove LMI.
- Adding LMI to your loan means paying interest on it for decades.
Lenders mortgage insurance (LMI) is a one-off premium most lenders charge when you borrow more than 80% of a property's value. It protects the lender, not you, if you default. On a typical first home it can cost tens of thousands of dollars, but there are several legitimate ways to avoid it.
What LMI costs
LMI is priced on your loan-to-value ratio (LVR) and loan size, and varies by lender and insurer. As a rough guide, on a $750,000 home:
| Deposit | Loan | LVR | Indicative LMI |
|---|---|---|---|
| 20% ($150,000) | $600,000 | 80% | None |
| 15% ($112,500) | $637,500 | 85% | $6,375 |
| 10% ($75,000) | $675,000 | 90% | $12,825 |
| 5% ($37,500) | $712,500 | 95% | $25,650 |
Indicative estimates only, using typical premium rates. Your lender will quote the actual premium, and some states charge stamp duty on it.
Most lenders let you add LMI to the loan. That's easier on your savings, but you then pay interest on it: adding $25,650 to a 30-year loan at 6.20% costs about $56,555 in repayments over the life of the loan.
1. The 5% Deposit Scheme (First Home Guarantee)
Since 1 October 2025, the Australian Government's 5% Deposit Scheme lets eligible first home buyers buy with a 5% deposit and no LMI. The government guarantees up to 15% of the property's value. There are no income caps and no limit on places. Single parents and legal guardians can buy with a 2% deposit under the Family Home Guarantee.
The property price must be under the cap for its location:
| State | Capital city and regional centres | Rest of state |
|---|---|---|
| NSW | $1,500,000 | $800,000 |
| VIC | $950,000 | $650,000 |
| QLD | $1,000,000 | $700,000 |
| WA | $850,000 | $600,000 |
| SA | $900,000 | $500,000 |
| TAS | $700,000 | $550,000 |
| ACT | $1,000,000 | n/a |
| NT | $750,000 (Darwin) | $600,000 |
Other rules: you must be an Australian citizen or permanent resident aged 18 or over, buy a home to live in, take a principal and interest loan, and apply through a participating lender. "First home buyer" includes people who haven't owned property in Australia in the last 10 years. Check your figures with the First Home Guarantee calculator.
2. Save a 20% deposit
The simplest way. Remember you'll also need cash for stamp duty and costs. On a $750,000 home, a 20% deposit is $150,000, and stamp duty can add another $25,000 to $45,000 unless you get a first home buyer concession. See stamp duty by state. The First Home Super Saver scheme can speed up saving by letting you save inside super, where the money is taxed at a lower rate.
3. A family guarantee
A parent or close relative uses equity in their own property as extra security for part of your loan. With a guarantor, many lenders lend up to 100% of the price (sometimes more, to cover costs) with no LMI. The risk is real: if you can't pay, the guarantor may have to. They should get independent legal advice first.
4. Professional LMI waivers
Some lenders waive LMI for certain professions (often doctors, dentists, lawyers, accountants and some engineers) at up to 85% or 90% LVR, sometimes with an income minimum or professional membership requirement. A mortgage broker can tell you which lenders currently offer this.
5. Borrow a little less
LMI rises steeply at higher LVRs. Going from a 5% deposit to a 10% deposit can cut the premium by more than half. Even if you can't reach 20%, waiting a few months or buying slightly cheaper can make a big difference.
Is paying LMI ever worth it?
Sometimes. If prices are rising faster than you can save, paying LMI to buy sooner can work out cheaper than waiting. It's a judgement call that depends on the local market, your job security and how comfortably you can afford repayments. Use the rent vs buy calculator to compare.
Frequently asked questions
How much is LMI on a 10% deposit?
As a rough guide, about $12,825 on a $750,000 home with a 10% deposit. The exact premium depends on the lender, the insurer and your loan size.
Can I avoid LMI with a 5% deposit?
Yes, if you're an eligible first home buyer using the 5% Deposit Scheme with a participating lender and the property is under the price cap. There's no income cap since 1 October 2025.
Is LMI refundable if I sell or refinance?
Usually not, or only partly in the first year or two with some insurers. If you refinance with less than 20% equity, you may have to pay LMI again.
Does LMI protect me?
No. It protects the lender if you default and the sale doesn't cover the loan. The insurer can still pursue you for the shortfall.
Sources
- Housing Australia: 5% Deposit Scheme
- Housing Australia: property price caps
- Moneysmart: lenders mortgage insurance
More guides
Last reviewed October 2026. This guide is general information only. It isn't financial, tax, credit or legal advice and doesn't consider your circumstances. Rules change, so check the official sources below or speak to a licensed professional before you make a decision.