Saving for a home deposit can be one of the biggest challenges for buyers. If you don’t have a 20% deposit, you may need to pay Lenders Mortgage Insurance (LMI)—a cost that allows you to secure a home loan with a smaller upfront amount. At Mortgage Matrix, we make home loans simple, so here’s everything you need to know about LMI.

What Is Lenders Mortgage Insurance (LMI)?

LMI is a one-time fee that protects the lender (not the borrower) if you’re unable to repay your loan. It’s typically required when your deposit is less than 20% of the property’s value, reducing the lender’s risk.

How Does LMI Work?

When you take out a home loan with a deposit below 20%, your lender arranges LMI on your behalf. The cost is then added to your loan amount or paid upfront. This allows you to enter the market sooner rather than waiting years to save a larger deposit.

How Much Does LMI Cost?

LMI costs vary based on:
✔ Your Loan Amount – The higher the loan, the higher the LMI cost.
✔ Loan-to-Value Ratio (LVR) – A higher LVR (meaning a lower deposit) increases the LMI premium.
✔ Lender’s Policy – Different lenders have different LMI rates and providers.

To estimate how much LMI you might need to pay, use our Borrowing Power Calculator to see how much you could borrow.

Ways to Avoid or Reduce LMI

💡 Save a Larger Deposit – A 20% deposit eliminates the need for LMI entirely.

💡 Use a Guarantor Loan – A family guarantor can secure your loan, reducing or removing the need for LMI.

💡 First Home Buyer Schemes – Government grants and schemes, such as the First Home Guarantee, can allow eligible buyers to purchase with as little as 5% deposit without paying LMI.

💡 Choose a Lender with Lower LMI Costs – Some lenders offer discounts or waived LMI under specific conditions.

Is Paying LMI Worth It?

LMI may feel like an extra cost, but in many cases, it allows buyers to enter the property market sooner instead of waiting years to save a larger deposit. With rising property prices, getting in earlier could mean saving more in the long run.

Thinking About Buying a Home?

Understanding LMI is just one part of the home loan process. At Mortgage Matrix, we help you explore your options and find the best loan for your situation. Book a free appointment today and take the first step towards homeownership!