Lenders mortgage insurance (LMI)
Insurance that protects the lender, not you, if you default on a loan. It is usually charged when you borrow more than 80% of the property's value.
- Protects the lender against loss
- Usually applies above 80% LVR
- Can be paid upfront or added to the loan
How it works
The premium is calculated on the loan size and LVR, and rises sharply as LVR increases. It is a one-off cost, often capitalised into the loan.
Is it worth paying?
Sometimes. Paying LMI can let you buy sooner instead of saving a larger deposit, which may matter in a rising market. A licensed broker can compare the options.
For investment loans, LMI may be deductible over time. Check the treatment with your accountant.
Common questions
Does LMI protect me?
No. It protects the lender. You remain responsible for the loan.
Can I avoid LMI?
Usually by borrowing 80% or less, using equity, or with a guarantor.
Related terms
Sources
General information only. It does not consider your objectives, financial situation or needs, and is not financial, credit, tax or legal advice. Rules change, so check current law and get advice from a licensed professional before acting.