LMI

Lenders Mortgage Insurance or LMI in short is an insurance premium that you have to pay for when you borrow more than 80% of the property's value. 

For example, if you only have a 10% deposit and you’re not accessing any government schemes, you would be borrowing 90% of the property value which means that you are considered a higher risk to the lenders. LMI protects the lender, not you. If you were in a position where you couldn’t repay the loan and the property had to be sold, the insurer would cover any shortfall that the lender might face. LMI is a once off fee which will be added to your loan, so you don’t have to pay it upfront. 

Situations where you don’t need to pay LMI:

Some lenders offer to waive LMI for certain professions — like nurses, paramedics, police officers, and teachers — allowing them to borrow up to 90% without paying this insurance.

The First Home Guarantee scheme allows first home buyers to purchase with as little as a 5% deposit and the government acts as your guarantor, so no LMI applies.

A family guarantee, where a parent or family member uses equity in their home as additional security, can let you borrow without LMI.

If your deposit is 20% or more of the loan then you don’t need to pay LMI.

As your broker, I’ll calculate exactly what LMI would cost you at different deposits, check whether you're eligible for any waivers or schemes that could remove it, and help you decide whether paying for it makes sense for your situation or whether building up a bigger deposit is the better move.