LMI in 2026: What It Costs by Deposit Size
ADS Team
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July 24, 2026
29 days ago
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In short: Lenders Mortgage Insurance is a one-off premium charged when you borrow above 80% LVR. It protects the lender if the property is sold for less than the debt — it gives you no cover at all. On an $800,000 purchase with a 10% deposit the premium is commonly in the range of $15,000 to $22,000, and it is usually added to the loan rather than paid up front.
Key takeaways
- LMI rises steeply with LVR: the jump from 90% to 95% roughly doubles the premium.
- Capitalising the premium means paying interest on it for the life of the loan.
- On an $800,000 purchase, a $19,000 capitalised premium costs about $120 a month at 6.5% over 30 years.
- Paying LMI can still be cheaper than waiting if prices rise faster than you save.
Indicative premiums by price and deposit
Premiums vary by insurer, lender and borrower profile. As an indicative guide for owner-occupiers:
| Property price | 10% deposit (90% LVR) | 5% deposit (95% LVR) |
|---|---|---|
| $500,000 | ~$8,500 | ~$16,000 |
| $650,000 | ~$12,500 | ~$24,000 |
| $800,000 | ~$19,000 | ~$34,000 |
| $1,000,000 | ~$24,000 | ~$44,000 |
Always obtain a quote for your specific scenario. The step between 90% and 95% is the sharpest in the table and is the single strongest argument for finding another 5%.
What does capitalising really cost?
Most borrowers add the premium to the loan. A $19,000 premium on an $800,000 purchase with a 10% deposit takes the loan from $720,000 to $739,000.
- Extra monthly repayment at 6.5% over 30 years: about $120
- Extra interest over the full term: about $24,200
- Total cost of the $19,000 premium if carried to term: roughly $43,200
Paying it up front, or repaying that portion early, avoids most of that additional interest.
When is paying LMI the better decision?
Compare the premium against the cost of delay. If a $800,000 target property appreciates 5% while you spend a year saving, the price rises $40,000 and the deposit you need rises with it. A $19,000 premium to buy immediately is the cheaper path in that scenario.
The reverse holds in a flat or falling market, where waiting costs little and the extra deposit reduces both the premium and the interest bill. The honest answer depends on a price forecast nobody can make reliably, which is why the decision should also weigh how secure your income is and how long you intend to hold.
Frequently asked questions
Does LMI protect me if I cannot repay?
No. It protects the lender. If the property is sold at a loss, the insurer pays the lender and may then pursue you for the shortfall through subrogation.
Can I avoid LMI without a 20% deposit?
Yes, in specific cases: a guarantor or family pledge, eligibility for a government deposit scheme, or a professional waiver available to certain occupations at up to 90% LVR.
Is LMI tax deductible?
For an investment property, LMI is generally treated as a borrowing expense and deducted over five years or the loan term, whichever is shorter. For an owner-occupied home it is not deductible. Confirm with a registered tax agent.
Related reading
- LVR Explained: Why 80% Is the Magic Number
- Offset Account vs Redraw: The Real Difference
- Fixed vs Variable in a Hiking Cycle: The 2026 Decision Framework
Sources
- Lenders mortgage insurance — ASIC Moneysmart
- Borrowing expenses for rental properties — Australian Taxation Office
Rates checked as at 2 August 2026. Interest rates, lender policies and government schemes change frequently. Figures in this article are illustrative and were accurate at the date shown.
General advice warning: This article contains general information only. It does not take into account your objectives, financial situation or needs, and it is not personal credit or financial advice. Consider whether it is appropriate for you and seek advice from a licensed credit representative before acting.
Any interest rate shown is an example only and is not an offer of credit. Where a rate is quoted, the applicable comparison rate is available from the relevant lender and should be considered alongside it.
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