Borrowing more than 80% of a property’s price usually means paying lenders mortgage insurance (LMI). Put in the price, your deposit and your state, and the calculator gives you an estimate of the LMI, the stamp duty on it, and how much more deposit you would need to avoid it.
How this LMI estimate is worked out
LMI is priced as a percentage of the loan. That percentage goes up with two things: how much of the price you borrow (your LVR) and how big the loan is. For example, a $675,000 loan at 90% LVR sits at about 2.37% of the loan, which is roughly $16,000. The same loan at 85% LVR drops to about 1.33%, or around $9,000.
We use a published example lender rate card for standard full-doc, owner-occupier loans up to $1 million, split into 1% LVR steps and five loan-size bands. We then add the stamp duty your state charges on the premium. We checked our numbers against published worked examples from other Australian lenders and comparison sites, and they line up.
It is still an estimate. The real premium comes from your lender’s mortgage insurer, and it can move with the loan purpose, whether you are self-employed, the property type and your lender’s own deal with its insurer. Some of the big banks charge a lot more than the figures here. Get a written quote before you sign anything.
Stamp duty on LMI by state
Most states charge stamp duty on the LMI premium, on top of the premium itself:
- NSW: none (LMI has been exempt since 1 July 2017)
- ACT: none
- Victoria: 10%
- Queensland: 9%
- Western Australia: 10%
- South Australia: 11%
- Tasmania: 10%
- Northern Territory: 10%
So the same $16,000 premium costs about $17,600 in Victoria and $17,760 in South Australia.
Pay it upfront or add it to the loan?
Most lenders let you add the LMI to your loan instead of paying it in cash. That keeps more money in your pocket at settlement, but you pay interest on it for the life of the loan. On a 30-year loan at around 6%, a $16,000 premium added to the loan costs you roughly $18,500 in extra interest if you never pay it down early. Adding it also pushes your LVR up, which matters if you are close to 95%.
Ways to pay less LMI, or none
- Save to 20%. At 80% LVR or below, most lenders charge no LMI. The calculator shows exactly how much more you would need.
- Get under the next step. Premiums jump at certain points, especially going from 90% to 90.01%. Borrowing a few thousand less can save you thousands.
- First home buyer schemes. The federal Home Guarantee Scheme lets eligible first home buyers buy with a 5% deposit and no LMI. Price caps apply depending on where you buy.
- A family guarantee. A parent can put up equity in their own home as extra security, which can remove the need for LMI.
- Professional waivers. Many lenders waive LMI up to 90% LVR (sometimes more for doctors) for medical professionals, lawyers, accountants and some other professions.
A good mortgage broker will know which lenders price LMI more cheaply for your situation. Compare the best mortgage brokers in Sydney, Melbourne or Brisbane.
Related calculators
Work out your repayments with the mortgage repayment calculator, and the upfront tax with the stamp duty calculator.
LMI questions
Who does LMI protect?
The lender, not you. If you default and the sale of the property does not cover the debt, the insurer pays the lender. The insurer can still chase you for the shortfall.
Can I get LMI back if I sell or refinance?
Usually not. Some insurers pay a partial refund if you refinance or sell in the first year or two, but most premiums are not refundable.
Do investors pay more LMI?
Often yes. Many lenders load the premium for investment loans, low-doc loans and self-employed borrowers, so treat this estimate as a starting point in those cases.
What about loans over $1 million?
Big loans are priced case by case and some lenders cap the LVR lower. The calculator still gives a figure, but treat it as the least you are likely to pay.