What Is Lenders Mortgage Insurance (LMI)?

How does LMI work?

Your lender insures itself with LMI when you borrow more than 80% of the property's value, passes the premium to you, and claims on the policy if the home later sells for less than you owe.

1. You borrow with a deposit under 20%, so your LVR is above 80%.
2. The lender arranges LMI with its insurer, or carries the risk itself. You cannot buy LMI directly.
3. You pay the premium, either at settlement or by adding it to the loan.
4. If you default and the home sells for less than the debt, the insurer pays the lender's loss.
5. The insurer can then recover that shortfall from you.

To see what it would cost on your loan, use the LMI calculator. Typical figures by deposit and price are in how much LMI costs. The full method is in how LMI is calculated.

Who does LMI protect, and who pays?

You pay for LMI, but only the lender can claim on it.

When is LMI required?

LMI is usually required when your loan is more than 80% of the property's value, measured against the lower of the purchase price and the lender's valuation.

Work out your own ratio with the LVR calculator. Many first home buyers avoid LMI through the 5% Deposit Scheme: see LMI for first home buyers.

Can you add LMI to your loan?

Yes. You can pay LMI at settlement or have the lender add it to your loan, and CommBank adds it to every loan.

CommBank's example: a $500,000 property with a $450,000 loan is 90% LVR. Add $9,000 of LMI and the loan becomes $459,000, an LVR of 91.8%. QBE caps the LVR at 95% before the premium is added and 100% after it.

CommBank's guide prints 91.74%; $459,000 divided by $500,000 is 91.8%.

Is LMI refundable?

Sometimes, in part. If you repay the loan within 12 months, most published policies return up to 40% of the premium, and ANZ may return up to 50%. CommBank refunds nothing.

Do you pay LMI again when you refinance?

You can. LMI stays with the loan it was bought for, so a new lender charges it again if your new loan is above its LVR threshold.

Refinancing to a new lender

LMI does not transfer to a new lender: CommBank and NAB both say so. If you leave early, your old lender's refund terms may return part of the premium (see the refunds table). A 5% Deposit Scheme guarantee can also end if you refinance to a lender outside the scheme, and that lender may then require LMI.

Topping up with your current lender

Helia charges a new LMI fee on an additional advance, with credit for the original fee, so you pay the difference or the minimum. QBE works out the new LVR on the total loan, applies that LVR's rate to the total, and subtracts the premium already paid.

Moving house with the same loan

St.George calls this substitution of security: a like-for-like property of equal or greater value, with no portability fee. QBE lets a lender swap the security without referring it back if the loan and the LVR do not rise. Helia says a partial refund may be payable when the security property is replaced.

Which companies provide LMI in Australia?

Three insurers write LMI in Australia: Arch, Helia (formerly Genworth) and QBE. Some lenders also carry the risk themselves. Refund rules and an independent estimate for two of them are on our Helia LMI and QBE LMI pages.

Which LMI insurer does each lender use?

CommBank and the Westpac group use Arch, ING and BOQ use Helia, Bank Australia and Suncorp Bank use QBE, and ANZ uses its own insurer. NAB and Macquarie do not publish theirs.

Lenders mortgage insurance FAQs

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