Lenders mortgage insurance is a one off premium you pay when you borrow more than 80% of what a property is worth. The part people get wrong is who it covers. It protects the lender if you default and the sale does not clear the debt. You pay for it and you get nothing from it, which is how ASIC describes it too: the insurance does not benefit the borrower.
It is also avoidable more often than it used to be. Since October 2025 a first home buyer with a 5% deposit can skip it entirely through the government scheme, and some professions have never paid it at all.
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What LMI actually costs
There is no published rate card, because the premium depends on the loan size, the deposit, the property and the insurer. Commonwealth Bank puts the range at 1% to 5% of the loan amount, and it climbs steeply as the deposit shrinks. These are real figures rather than estimates.
| Purchase | Deposit | Premium |
|---|---|---|
| $1,000,000 in Sydney | 5% | About $42,000 |
| $600,000 in Bendigo | 5% | About $25,000 |
| $500,000 loan | 10% | Over $10,000 |
| Smallest premium QBE writes | n/a | $1,150 including GST |
The first two come from the Prime Minister’s office, the third from Commonwealth Bank and the last from the QBE LMI guide. For a figure on your own purchase, the Helia estimator is the one the lenders themselves use.
The premium is rarely paid in cash
Almost every lender adds it to the loan at settlement. CommBank states plainly that premiums are capitalised and that you pay more interest over the term as a result. On a $30,000 premium added to a 30 year loan at 6%, our own calculation puts the interest on that piece alone at roughly $35,000, which more than doubles what the insurance really costs you.
Weigh up that total rather than the premium on its own. Ask the lender for both.
Four ways to avoid paying it
1. A 20% deposit
Borrow 80% or less and no insurance applies. It also gets you the sharpest advertised rates, since most lenders price their best variable rates below 80%.
2. The government 5% deposit scheme
Housing Australia guarantees part of the loan in place of the insurance, so a first home buyer puts in 5% and pays no premium. Income limits and the cap on places both went in October 2025, so the only real test now is the property price cap for your area. Single parents get the same deal on a 2% deposit. See our guide to buying with a 5% deposit and the Family Home Guarantee.
3. A guarantor
A parent or close family member puts up equity in their own home as extra security, which drops your loan below 80% of the combined value. Westpac caps its family security guarantee at half the guarantor’s security and half the loan, and the guarantee can be released once you are under 80% on your own. The risk sits with the guarantor, so it is a conversation to have properly. Our guide to guarantor loans covers what they are signing up for.
4. A profession based waiver
Some lenders waive the insurance entirely for occupations they consider low risk. The premium is removed altogether rather than discounted.
| Lender | Who it covers | How far they will go |
|---|---|---|
| Westpac, St.George and Bank of Melbourne | Dentists, GPs, medical specialists and hospital doctors | Up to 95% of the value, no minimum income, loans to $5 million |
| Westpac, St.George and Bank of Melbourne | Nurses, midwives, physiotherapists, psychologists, pharmacists, optometrists, vets, sonographers and a dozen other allied health roles | Up to 90%, minimum income $90,000 |
| Westpac group | Accounting and legal, under their industry specialisation policy | Up to 90%, accreditation and income conditions apply |
| ANZ | Registered medical practitioners, specialists and dentists | Up to 95%, loans to $4.75 million |
| BOQ Specialist | Doctors and dentists | Up to 100% |
| NAB | Medical, plus accountants, actuaries, financial analysts, barristers and solicitors | Not published, ask the lender |
From the Westpac broker niche booklet, ANZ, BOQ Specialist and NAB, current September 2026. Policies move, so confirm before you count on one.
Can you get any of it back?
Treat it as gone. Lenders describe the premium as a one off, non refundable and non transferable cost, and St.George spells out that it does not move with your loan if you refinance elsewhere. Pay it at 95% today, refinance to another bank in two years while still above 80%, and you pay it again.
Insurers do run partial refund schedules, QBE within twelve months of settlement for example, but those sit between the insurer and the lender rather than being something you can claim. If you think you have a case, ask the lender in writing.
The practical lesson is to get the loan structure right the first time, since the cost of getting it wrong is paid twice.
Who is actually insuring the loan
Three insurers are authorised by APRA to write this business in Australia: Helia, which used to be Genworth, QBE, and Arch. Some lenders skip them and carry the risk themselves. Commonwealth Bank charges a Low Deposit Premium instead, which is a bank fee rather than insurance, and you pay one or the other rather than both.
It matters for one reason. Insurers apply their own rules on top of the lender’s, so a file that suits the bank can still be knocked back by the insurer. A self insuring lender removes that second opinion, which can be the difference on a tricky application.
What changed recently
The October 2025 expansion of the 5% deposit scheme took a large share of first home buyers out of the insurance market altogether. Helia told the market it expects the scheme to remove most first home buyers from its book and is chasing upgraders and investors instead. For buyers this is the good news: the group most likely to be charged a premium is now the group most likely to qualify for a scheme that removes it.
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Common questions
At what point does LMI kick in?
Above 80% of the property value. At exactly 80% you pay nothing, and at 80.5% you pay the full premium, so it is worth finding the last few thousand dollars if you are close.
Is LMI the same as mortgage protection insurance?
No, and the names cause real confusion. Lenders mortgage insurance protects the bank. Mortgage protection insurance is a separate product you buy to cover your own repayments if you cannot work. One is compulsory above 80%, the other is optional.
Does paying LMI get me a better rate?
No. You are borrowing at a higher share of the value, so the rate is usually higher, not lower. The premium buys the lender cover, not you a discount.
Can I pay it upfront instead of adding it to the loan?
Most lenders allow it and few borrowers do, because the cash is usually needed elsewhere at settlement. If you have the money spare, paying it upfront avoids about the same amount again in interest over a 30 year term.
Is it better to wait and save a 20% deposit?
That depends on what prices do while you save, which nobody can promise. The sharper question in 2026 is whether you qualify for the 5% deposit scheme, since that removes the premium without the wait. Run both paths on your own numbers before deciding.
Does the insurer chase me if the loan goes bad?
Yes, that surprises people. The insurer pays the lender’s shortfall and can then pursue you for it. Paying the premium does not write off your debt.
Premiums, waivers and lender policies confirmed September 2026 against APRA, ASIC Moneysmart, QBE, Helia and the lenders named above. Check the linked source before relying on a figure.
James Haywood
Financial Services Expert
James has worked with property investors since 2017, helping them scale portfolios on market data rather than guesswork — picking suburbs with room to grow, and structuring the loans around a long-term plan instead of the next purchase.
Through his Property Surfer Program, clients get their purchase structure set up before they buy, access to the market data behind the suburb calls, and automated loan repricing every three months so the rate does not quietly drift upward. Asset protection and risk sit inside the structure rather than being handled afterwards.
He works alongside a referral network across financial planning, accounting, conveyancing, family law and building inspections, so clients are not assembling a team of their own from scratch.