Lenders Mortgage Insurance in Australia: Costs and Loan Impact

What LMI does

Lenders mortgage insurance protects the lender against a loss if a borrower defaults and the property sale does not cover the debt. Paying the premium does not give the borrower repayment protection or establish that the loan is affordable.

ASIC Moneysmart says LMI is usually payable when borrowing more than 80% of a property's value. A lender's assessment and any applicable exception still matter. Source: Moneysmart LMI definition.

Use the LMI Calculator for an indicative planning estimate. Obtain the actual premium and conditions from the lender before relying on a budget.

Start with the loan-to-value ratio

LVR divides the loan amount by the property value used in the assessment. In an invented example, a $630,000 loan against a $700,000 property gives an LVR of 90% before adding any financed costs.

The $70,000 difference is the contribution towards the price. It is not the entire cash budget: duty, conveyancing, inspections and other buying costs are separate. The Property Purchase Cost Calculator helps keep those items visible.

The purchase price and the value accepted by a lender may differ. A calculator cannot confirm the lender's valuation, LMI requirement, insurer acceptance or credit decision.

Worked example: paying upfront or adding the premium

Assume a $300,000 principal-and-interest loan, a constant 6% annual rate, monthly payments and a 30-year term. Now assume an illustrative $3,000 premium. This is an arithmetic input, not a premium quote or an estimate of what that loan would attract.

Adding the $3,000 produces about $6,475.15 in extra scheduled payments across 360 months: the premium plus about $3,475.15 of interest. These totals use unrounded monthly amounts. They assume no extra repayments, offset, rate changes or fees and do not reproduce a lender's daily interest calculation.

Run both balances through the Mortgage Repayment Calculator. Confirm whether the lender permits the premium to be added, and whether that changes any other loan terms. Paying it separately also uses cash that would otherwise remain available for other costs.

Questions to take to the lender

• What is the actual premium, including any applicable charges?
• What property value and loan balance were used in the LVR assessment?
• Can the premium be financed, and what is the resulting total loan balance?
• Does any waiver or government scheme apply to this application, and what evidence is required?
• What happens to the premium if the loan is repaid or refinanced early? Ask for the relevant terms rather than assuming a refund.

A smaller premium alone does not identify the most suitable loan. Compare the interest rate, ongoing fees and features over the same period, using the Loan Comparison Calculator as an estimate.

Investment-property tax questions

Do not assume that an LMI payment is an immediate tax deduction or subtract an assumed refund from the settlement budget. For a rental property, consult the ATO's borrowing-expense guidance and a registered tax agent about the use of the borrowed money, timing and any private component. This guide does not calculate a deduction or determine entitlement.

Sources and limitations

• ASIC Moneysmart: lenders mortgage insurance, definition checked 4 October 2026.
• ASIC Moneysmart: buying a house, deposit and buying-cost context checked 4 October 2026.
• ATO: rental expenses claimed over several years, reference for checking individual tax treatment.

General information and illustrative calculations only. Not financial, credit, legal or tax advice, an insurance quote, approval or recommendation. Check lender terms and speak with a licensed professional or registered tax agent where appropriate.

Last updated: 4 October 2026.