What is Lenders Mortgage Insurance (LMI)? And when is it required?

Specifically, it applies in the event a borrower defaults on their loan, and the property is sold for less than the outstanding loan balance, leaving a shortfall. The insurer pays the bank the loss, then may peruse the borrower for the loss.

–         LMI is generally required when the loan you need exceeds 80% of the property’s value. However certain banks only apply this over 85%, and even 90%/95% for some professionals (Doctors/Law professionals/Accountants etc.).

–         LMI is a large fee to get into a property earlier than if you saved additionally. If you waited to save the additional deposit, the property market may go up by more than what the premium ends up being.

–         Generally, LMI can be attained up to a $2,500,000 purchase price.

–         You will need to show genuine savings, where you have held 5% of the purchase price in your account for three most recent months prior to application.

–         There are products such as family guarantee to avoid LMI, or government schemes such as first home loan deposit scheme, new home guarantee, family home guarantee which allow LMI to be avoided too.

Please reach out with any questions you have, Tom.


Written by Tom Morison

I have a genuine desire to create a strong reassuring sense of trust, confidence and satisfaction for my clients. It’s important that I provide you with the knowledge I have so you can make the best decisions for yourself with my guidance.
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