What Is LMI and When Do You Pay It?
Lenders Mortgage Insurance (LMI) is a one-off premium paid by the borrower — but it protects the lender, not you. It applies when your deposit is less than 20% of the property value (LVR above 80%).
Approximate Helia / QBE blended owner-occupier P&I LMI premium on a $675,000 loan at each LVR band. The last 5% of LVR (90% → 95%) costs roughly the same as the prior 10% combined.
The curve explains why even a small extra deposit is so valuable above 90% LVR. Moving from 95% to 90% deposit (an extra ~$33,750 on a $675,000 purchase) saves about $12,000 in LMI alone — a 36% effective return on that extra deposit, before counting saved interest on the smaller loan and removed stamp-duty surcharge.
Take a $750,000 home in suburban Brisbane (or a unit in inner Sydney). Same lender, same Helia premium schedule, owner-occupier, full P&I. Watch how LMI swings with the deposit:
The LMI premium roughly quadruples between an 85% and 95% LVR, because LMI is priced on a non-linear curve — the lender's tail-risk on a 95% loan is more than three times the tail-risk on an 85% loan. The single extra 5% of deposit between 90% and 95% costs roughly $13,600 in additional LMI alone.
If the 5%-deposit LMI of $30,677 is capitalised on top of the loan and the loan is held for the full 30 years at 6%, the interest on the LMI portion alone adds about $35,000 over the life of the loan — so the true cost is closer to $66,000, not $30,000.
Four real situations that come up regularly, and how LMI applies to each.
1. First Home Buyer with 5% deposit using First Home Guarantee
Eligible first home buyers (single income up to $125,000 or couple up to $200,000, both Australian residents, owner-occupier intent, property under the FHG price cap for the location) can use the First Home Guarantee with just 5% deposit and no LMI. Housing Australia (formerly NHFIC) guarantees the gap between 80% and 95%. On a $750,000 purchase this saves around $30,000 in LMI plus the foregone interest on the capitalised premium — easily the biggest single financial concession available to qualifying first home buyers.
2. Family-pledge guarantor at 100% LVR (no deposit)
A parent or close family member pledges equity in their own home as security for the portion of your loan above 80% LVR. With the guarantor structure, the effective LVR is treated as 80% on your property and the rest secured by the family equity. Result: no LMI. The cost is shifted: the guarantor is at risk if you default and a forced sale doesn't recover the full loan. Most lenders structure the guarantee to fall away once your LVR reaches 80% on your own property through repayments and growth.
3. Professional LMI waiver (medical / legal / accounting professionals)
Some lenders offer LMI waivers up to 85% or even 90% LVR for borrowers in selected professions (general practitioners, specialists, dentists, vets, optometrists, pharmacists, qualified accountants, lawyers, and some engineering disciplines). Income, length-of-time-qualified and current employment usually need to be verified. The waiver typically saves $8,000–$25,000 on a metro-priced home. Always compare the waiver-eligible lender's headline rate against the cheapest non-waiver rate before deciding — sometimes the rate premium is more than the LMI saving.
4. Refinancing back above 80% LVR
A common surprise: refinancing from a lender that originally charged LMI to a new lender while your LVR is still above 80% means the new lender will require a fresh LMI premium. LMI does not follow you. Some lenders offer "LMI portability" within their own brand for a small administrative fee, but it's rare across institutions. A good rule of thumb: don't refinance while your LVR is above 82% unless the rate savings clearly exceed the new LMI cost. If you must, ask the new lender whether they can credit any unused portion of your original LMI premium (a few do, most don't).
Capitalised LMI compounds. The single biggest hidden cost is the interest charged on a capitalised LMI premium over the loan life. Adding $25,000 of LMI to a $675,000, 30-year, 6% mortgage doesn't add 3.7% to your repayment — it adds the equivalent of $25,000 × the amortisation factor (~1.83 at 6%/30y), so the lifetime cost of the LMI is closer to $45,750.
LVR is recalculated at every loan event. Refinancing, switching from interest-only to P&I, or adding a top-up redraw can all push your effective LVR back above 80% and trigger LMI. Always model the after-LMI cash position before signing.
Investor and SMSF loans have higher premiums. Helia and QBE charge higher rates on investor loans, and higher again on SMSF (self-managed super fund) loans. The numbers shown by this calculator reflect typical owner-occupier P&I premiums. If you're an investor at 85% LVR, expect premiums roughly 15–25% higher than the owner-occupier figure.
The price cap on First Home Guarantee is location-specific and revised periodically. The published cap is higher for Sydney, Melbourne, Canberra and the regional capitals than for the rest of each state, and is reset (typically annually) by Housing Australia. Always check the current cap before assuming a property qualifies — buying just over the cap means losing access to the scheme entirely.
What this calculator does not model. Sub-state variations within QLD's stamp duty on LMI, lender-specific premium overlays (some lenders charge an "LMI funder fee" of $200–$600 on top of the insurer premium), loyalty discounts, or LMI premiums on construction loans or split loans where each portion has a different LVR.
Premiums are estimated from published Helia and QBE LMI rate sheets for owner-occupier, principal-and-interest, 30-year loans, taken as the higher of the two providers' rates for the loan amount / LVR cell. The premium is computed as base loan × premium-rate-for-cell, then the relevant state stamp duty surcharge on the premium is added (NSW ~9%, VIC ~10%, QLD ~9%, WA ~10%, SA ~11%, TAS ~10%, ACT 0%, NT 0%). The model does not include lender funder fees, investor / SMSF overlays, family-pledge discounts, or rate variations for interest-only loans, mortgage-insurance "free" promotional periods, or low-deposit FHG-style government guarantees (handled as zero LMI for eligible applications).
Sources: Helia LMI premium estimator; QBE LMI; Housing Australia — First Home Guarantee scheme; ASIC MoneySmart — Lenders Mortgage Insurance; APRA quarterly ADI statistics.
Reviewed: 18 May 2026 · Updated for: Helia / QBE 2026 owner-occupier P&I rate sheets; First Home Guarantee scheme price caps current as of March 2026 · Editor: AussieCalc Editorial Team
Lenders Mortgage Insurance (LMI) is a one-off premium charged when you borrow more than 80% of a property's value — that is, when your deposit is less than 20%. LMI protects the lender (not you) if you default on the loan. Despite this, the cost is passed entirely to the borrower — either paid upfront at settlement or capitalised (added) into the loan balance.
This calculator uses rate schedules from Helia (formerly Genworth) and QBE — Australia's two main LMI providers. Premiums are calculated as a percentage of the loan amount, and that percentage increases as your LVR (Loan-to-Value Ratio) rises. Borrowing 85% of a property's value attracts a substantially lower LMI premium than borrowing 95%.
LMI is also subject to stamp duty in most states — the calculator includes this in the total cost estimate. The stamp duty rate on LMI premiums varies by state, typically between 9% and 11% of the premium.
The LMI premium shown is an estimate based on published rate schedules. Your actual LMI cost is set by your lender's chosen provider and may differ slightly. First home buyers eligible for the First Home Guarantee can avoid LMI entirely with a 5% deposit — use that link to check eligibility.
What is Lenders Mortgage Insurance (LMI)?
LMI is an insurance policy that protects the lender — not you — if you default on your loan and the property sale doesn't cover the outstanding debt. It applies when your deposit is less than 20% of the property value (LVR above 80%). You pay the premium but the bank is the beneficiary.
How can I avoid paying LMI?
The most straightforward way is to save a 20% deposit. Alternatively, eligible first home buyers can use the First Home Guarantee (formerly FHLDS) to buy with just 5% deposit and no LMI, with the government guaranteeing 15% of the loan. Some lenders also waive LMI for certain professionals (doctors, lawyers, accountants) at higher LVRs.
Can LMI be added to my loan?
Yes — most lenders allow you to "capitalise" the LMI premium, meaning it gets added to your loan balance rather than paid upfront. This increases your loan amount and the interest you pay over time, but reduces the cash you need at settlement. Use our Mortgage Calculator to see how the higher loan amount affects your repayments.
Does LMI attract stamp duty?
In most Australian states, LMI premiums attract a stamp duty surcharge — typically 9–11% of the LMI premium itself. ACT and NT do not charge stamp duty on LMI. This calculator includes the applicable stamp duty in your state's estimate.
Is LMI tax deductible?
For investment properties, LMI may be tax-deductible as a borrowing expense — typically amortised over the lesser of five years and the loan term. For owner-occupiers, LMI is generally not deductible. The ATO treats LMI on an investment loan as a "borrowing cost" under section 25-25 of the Income Tax Assessment Act 1997. Always confirm with a registered tax agent before claiming.
Helia vs QBE — does my lender's choice affect what I pay?
Yes, marginally. The two insurers publish slightly different premium schedules, so the same $700,000 loan at 90% LVR might attract a premium that's a few hundred dollars different between Helia and QBE. Most big banks use one provider as the default; smaller lenders sometimes shop between them. You can ask your lender (or broker) which provider they use and whether they can request a quote from the other.
When do I pay the LMI premium — upfront or at settlement?
LMI is settled at the same time as the property — the premium is paid by the lender to the insurer at loan drawdown. You either fund it from your savings on settlement day (less common, because most borrowers prefer to keep cash for stamp duty, conveyancing, removalists and reserves) or capitalise it onto the loan. There's no monthly LMI payment; it's a single one-off premium.
Will I get a refund if I sell or refinance early?
A small partial refund is sometimes available if you discharge the loan within the first one or two years, depending on the insurer's policy at the time of issue. After about two years, no refund is typical. The refund (where available) is calculated as a small percentage of the original premium and is paid through the lender, not directly to you. Don't budget around expecting a refund.
What's the First Home Guarantee and how does it interact with LMI?
The First Home Guarantee (administered by Housing Australia) lets eligible first home buyers purchase with a 5% deposit and no LMI — the government guarantees the portion of the loan between 80% and 95% LVR for the lender. You still pay the loan, interest and standard fees; only the LMI is removed. Eligibility includes income caps, citizenship/residency, owner-occupier intent, never-owned status, and a price cap that varies by location. There are also Family Home Guarantee (single parents, 2% deposit) and Regional First Home Buyer Guarantee variants.
Why does an 85% LVR cost so much less than 95%?
LMI premium rates rise non-linearly with LVR — every extra percentage point of LVR exposes the insurer to a disproportionately larger tail loss in a default scenario, because the realisable resale value of a foreclosed property in a soft market can fall 10–25% below the original purchase price. The result is that the marginal cost of the last 5% of LVR (90% → 95%) is typically the most expensive 5% you can borrow.
Does this calculator include the stamp duty on LMI?
Yes. Most states levy a stamp duty surcharge of 9%–11% on the LMI premium itself (the ACT and NT do not). The total cost shown by this calculator includes that surcharge, applied at your selected state's published rate. Note that this is separate from the property transfer duty — for that, use the Stamp Duty Calculator.