Lenders Mortgage Insurance (LMI) is one of several additional costs often incurred when buying property. Generally speaking, if you are borrowing at a Loan to Value Ratio (LVR) above 80%, you will likely need to pay LMI premiums unless an exemption applies.
LMI premiums can be a significant expense: If your home loan is $500,000 and the property is worth $600,000 (LVR of 83.33%), you can expect to pay around $4,000 in LMI premiums (estimated using the our LMI calculator), with the cost typically increasing with loan size and LMI. If you're a borrower who has already paid for LMI, there are certain circumstances where you may be entitled to a partial refund.
Lenders Mortgage Insurance refund
Borrowers who repay their home loan within two years of settlement that paid LMI may be entitled to a partial refund. An LMI policy covers the entire loan term, which will generally be 20-30 years. If you repay the loan within the first couple of years, that renders much of the policy obsolete, so it's natural to wonder whether you can get your money back. Generally, LMI refunds are only applicable for loans that are paid off in full within two years of settlement, and are capped at 50% of the premium amount. Refunds vary from lender to lender though, so you'll need to check to see the policy that applies to your home loan.
If you aren't paying off the loan, but refinancing with a different lender, you might be hoping to transfer your LMI policy across so you don't have to pay premiums again. However, since LMI is taken out between the insurer and the lender, this usually means the policy can't be transferred over, so you'll probably need to pay premiums again if your LVR is still above 80%.
How to get an LMI refund
If you think you might be entitled to an LMI refund, you'll usually need to contact your lender rather than the insurer. Since the insurance policy is taken out by the lender, not you, it is your lender that needs to request the refund.
If you are eligible for a refund, but don't do anything, your lender probably won't get in touch. You should therefore be proactive with reaching out as soon as possible, and following up if needs be. Lenders like QBE and Helia limit how long refund requests can be made after the loan is paid off, so you might need to chase your lender to make sure this gets done.
What lenders offer refunds on mortgage insurance?
There is no set rule on when LMI refunds are granted. It depends on both the lender and the LMI insurance provider. Below is the general policy at some of Australia's biggest banks.
|
Lender |
LMI provider |
Refund amount |
|---|---|---|
|
CommBank |
Helia |
Up to 40% if the loan is repaid within a year, 20% if between one and two years |
|
Westpac, St George, Bank SA, Bank of Melbourne |
Westpac LMI |
Up to 40% if the loan is repaid within a year, 20% if between one and two years. |
|
NAB |
QBE |
Up to 40% if the loan is repaid within a year, 20% if between one and two years. |
|
ANZ |
ANZ |
Up to 50% for loans repaid within a year, 25% if between one and two years. |
|
Suncorp |
QBE |
Suncorp say LMI refunds are generally non refundable, but in some limited cases customers may be eligible, depending on the arrangement with QBE. In general, QBE only offer refunds if the loan is repaid within one year. |
Other conditions may apply. For example, at Westpac, customers are ineligible for a refund if the loan has been in arrears, and refunds are only give when the amount is above a certain threshold.
Picture by Kelly Sikkema on Unsplash.
Article originally published in 2008. Updated May 2024
Collections: Home Loans LMI guides
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