Estimate the cost of Lenders Mortgage Insurance for your deposit size using LVR tier benchmarks, and compare the cost of paying LMI against alternatives such as the First Home Guarantee (no LMI at 5% deposit) or Help to Buy. Results show both an upfront premium and the higher total cost when LMI is capitalised into the loan.
What is LMI?
Lenders Mortgage Insurance is a one-off premium charged by the bank when your deposit is under 20%. The premium is paid by you (or added to the loan), but the policy protects the bank if you default.
Who does LMI protect?
The lender, not you. If you default and the sale of the home does not cover the debt, the insurer pays the bank the shortfall. The insurer can then pursue you for that amount.
Is LMI refundable?
Partial refunds are possible if you refinance or pay off the loan early (usually within 1-2 years), and only with some insurers. It is not guaranteed. Ask your lender before paying.
What is capitalised LMI?
The lender rolls the LMI premium into your loan instead of taking it upfront. You keep cash in hand but pay interest on the LMI for the full loan term, which adds up over 30 years.
How can I avoid LMI?
Three main ways: save a 20% deposit, use the First Home Guarantee (5% deposit, no LMI), or use Help to Buy (2% deposit, no LMI). Some professions also get LMI waivers from specific lenders.