LMI Explained (Australia 2026)
Last updated: March 3, 2026
Direct Answer
LMI is generally charged when your LVR is above 80%. It protects the lender, not the borrower, and can materially increase upfront or financed loan costs.
When LMI usually applies
- Deposit below 20% (LVR over 80%) often triggers LMI requirements.
- Some professional or policy exceptions may exist by lender.
- LMI can be paid upfront or capitalized into the loan balance.
How LMI changes decision-making
- Higher LMI raises total borrowing cost over the loan term.
- A larger deposit may reduce or remove LMI, but delays purchase timing.
- Model both 10% and 20% deposit scenarios before committing.
What to verify before contract
- Current lender LMI premium assumptions and fee treatment.
- Serviceability impact when LMI is added to loan principal.
- Trade-off between faster entry and higher long-term financing cost.
FAQ
Is LMI refundable? Usually not in full. Some limited partial outcomes may apply, depending on lender terms.
Does a guarantor loan avoid LMI? It can in some structures, but introduces separate legal and risk considerations.
Should I always wait for 20% deposit? Not always. It depends on your timeline, risk tolerance, and opportunity cost.