# Lenders mortgage insurance calculator

Saving that elusive 20% deposit can be a struggle, but it is possible to purchase a property with less if you’re willing to cop an additional fee: Lenders Mortgage Insurance (LMI).

Use Your Mortgage’s LMI Calculator to learn how much extra you might have to pay with your current deposit and property aspirations.

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.

## 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).

While LMI can be expensive, it is also celebrated by many wishful-homebuyers. Without the insurance offering, many banks and lenders would probably refuse to lend to those with smaller deposits.

Thus, LMI can help a buyer enter the market sooner than they otherwise might have.

## 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

• Which state you’re buying property in

• Whether you’re buying as an owner occupier or an investor

• The size of the loan you plan to take out

• The industry you work in

## How to use our LMI calculator

If you think you might be up for LMI, it’s a good idea to find out how much it could cost you before you apply for a home loan. After all, the earlier you know how much you might have to pay, the more financially prepared you can be.

Forward planning will also help you to decide how you will go about paying for LMI. Most buyers get the choice between paying LMI upfront or rolling it into their mortgage.

To get an estimate of your potential LMI expense, simply use Your Mortgage’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 access via a 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 to avoid LMI

LMI can be a big expense during a particularly expensive time. The last thing most borrowers want is to fork out potentially thousands of dollars more in addition to property purchase and transaction costs.

But without LMI a lot of first home buyers would be locked out of the market – putting together a 20% deposit is notoriously difficult.

Still, there are a number of ways buyers might be able to get away without paying for the insurance product, or at least lessen its cost.

Those who work in particular fields might find some lenders are willing to waive or reduce their LMI costs. If you’re employed in a typically high-paying role – think a doctor, accountant, lawyer, or veterinarian – you may be able to avoid or reduce your LMI expense as you could be seen to represent less risk to a lender.
If you work in an essential role, meanwhile, some banks might also waive your LMI cost. For example, a registered nurse with a 10% deposit could see their LMI waived by Westpac.

2. Have a guarantor
Another way to get around paying LMI is by having a guarantor. Many lenders will waive LMI requirements if a borrower is backed by a quality guarantor. A guarantor is a person – typically a parent or family member – who agrees to accept responsibility for home loan repayments if the borrower is unable to make them.

3. Turn to the Home Guarantee Scheme
The Home Guarantee Scheme allows eligible first home buyers to purchase a property with a deposit of as little as 5% without paying LMI. If you’re a single parent or guardian, you might be able to take advantage of the Family Home Guarantee and buy a home with a deposit of a little as 2% without paying LMI. Under the scheme, the government essentially acts to guarantor up to 18% of a property’s value.

4. Apply with certain lenders
Finally, some lenders offer discounts or even waive LMI fees for certain borrowers. For instance, ubank doesn’t demand borrowers with a 15% deposit pay LMI. So, doing your research on various lenders and their LMI policies can pay off in a big way.

## What is an LMI refund and are you eligible?

After potentially forking out thousands on LMI, its no wonder that many question if they’ll see any of that money again. And the answer to that question is ‘sometimes’.

In rare instances, a person can be refunded some of their LMI expense if they repay their home loan in full within a few years of taking it out.

It could be worth checking your LMI policy if you think you might be due a refund.

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.