Lenders Mortgage Insurance (LMI) calculator

It's possible to purchase a property with a small deposit if you’re willing to cop an additional fee: Lenders Mortgage Insurance (LMI). YourMortgage.com.au’s LMI Calculator can estimate how much it could sting you. 

Loan details
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LMI Estimate
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LVR
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This cost is based on a loan amount of $0, a property value of $0 and a deposit of $0 for a first home buyer.

Not all LMI calculations are the same. They vary between lenders based on a number of factors.

How to calculate Lenders Mortgage Insurance (LMI) costs

To get an estimate of your potential LMI expense, simply use YourMortgage.com.au’s LMI Calculator.

All you need to do is select whether you're a first-time homebuyer, enter the value of the property you wish to buy, and how much you will need to borrow via home loan and hey presto! The calculator will assess whether you’ll likely need to pay LMI and, if so, how much it might sting you.

How much a borrower must pay in LMI will vary between lenders and insurance providers, and will likely be determined by considering the size of their home loan, their income, and the industry they work in, among other factors. 

For example, here's how much various first home buyers might face in LMI premiums based on the size of their home loan and deposit:

Property value 5% deposit 10% deposit 15% deposit
$500,000 $19,285 $8,190 $4,237
$750,000 $38,760 $13,500 $6,375
$1,000,000 $51,680 $20,790 $10,115

LMI premiums presented above are an estimate provided by YourMortgage.com.au's LMI Calculator

What is Lenders Mortgage Insurance?

LMI is an insurance policy that protects a lender from any loss it may incur if a borrower defaults on their home loan. Despite common misconceptions, LMI does not protect the borrower (even though the borrower is the one who pays for it).

Most banks and lenders will demand a borrower pays LMI if they wish to buy a property with a loan-to-value ratio (LVR) of more than 80% (meaning, their deposit covers less than 20% of their property’s value).

How much does LMI cost?

LMI can be a big expense. In some cases, it can cost tens of thousands of dollars. Though, that cost can vary depending on factors such as:

  • Whether you’re a first home buyer
    Some lenders waive or reduce LMI costs for first-time buyers, who can also often access the 5% Deposit Scheme.
  • Whether you’re buying as an owner occupier or an investor
    Typically, investor loans are considered higher risk than owner-occupier loans, perhaps dictating a higher LMI cost.
  • The size of the loan you plan to take out
    Larger loans might represent a greater risk to lenders and insurance providers alike.
  • Your loan-to-value-ratio (LVR)
    Generally, the closer your LVR is to 80%, the smaller your LMI costs will be. 
  • The industry you work in
    Those who work in particular fields might find some lenders are willing to waive or reduce their LMI costs.
  • Whether you have a guarantor
    Many lenders will waive LMI requirements if a borrower is backed by a quality guarantor.

    See also: Ways to reduce the cost of your LMI

    Frequently Asked Questions

    There is a chance that, if you pay off your home loan within a few years of taking it out, you could get a partial LMI refund. 

    However, if you buy a new house or refinance your mortgage to a new lender, chances are you won't be eligible to have your LMI cost refunded.

    In fact, if your LVR is still above 80% when you refinance or buy a new property, you’ll probably have to pay for the insurance product all over again.

    There are two ways you can pay for LMI.

    Some lenders will allow you to roll LMI onto your home loan and pay it gradually over time alongside your mortgage repayments. However, this means that interest will accrue on the LMI expense, resulting in it costing you more over time.

    The alternative is to pay LMI upfront when you take out your mortgage.

    Because LMI allows borrowers to purchase a property with a smaller deposit, it can be a facilitator for investors who want to build a diverse portfolio with multiple properties.

    For many investors, LMI is simply seen as a cost of doing business. And because it can be capitalised back into the home loan, its impact on monthly cashflow is typically minimal.

    If you're using LMI to buy an investment property, the full cost of the premium is typically tax-deductible as a borrowing cost that can be amortised over the first five years of the investment.

    LMI is payable in two ways: as an upfront lump-sum payment, or by capitalising it into the loan. Capitalising your LMI fee means adding it to the home loan's principal balance and paying it off over the life of your mortgage. 

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