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Buying with less deposit.

A 20% deposit isn't the only way in. With the right structure you can buy with 5 to 10%, sometimes with no LMI at all.

What LMI is and who pays it.

Lenders Mortgage Insurance is a one-off premium the lender charges when the loan-to-value ratio goes above 80%. The insurance protects the lender, yet the borrower pays the premium, either upfront or capitalised into the loan. The cost rises with LVR. At 85% it's modest; at 95% it can run into tens of thousands. On the other hand, LMI is often the difference between buying now and waiting three years to save another 10% deposit, and in that time the property price may move by more than the LMI cost.

This page is part of home loans. First-home buyers should also read the first home buyer page, which covers the 5% Deposit Scheme (formerly the Home Guarantee Scheme) alternative to LMI.

Four paths to lower LMI cost.

5% Deposit Scheme
A government-backed scheme that lets eligible buyers purchase with as little as 5% deposit and no LMI.
Professional waivers
Doctors, lawyers, accountants and certain other professions qualify for LMI waivers up to 85 to 90% LVR with specific lenders.
Guarantor structure
Family equity used as additional security pushes the effective LVR below 80%, which removes LMI.
Capitalised LMI
Where LMI is unavoidable, capitalising it into the loan protects upfront cashflow at the cost of interest over the loan's life. Sometimes that is the right trade-off.

Low deposit FAQs

Is LMI refundable if I refinance?
Partly, within a short window. That's usually the first 12 to 24 months, with a pro-rata refund. After that, LMI is a sunk cost. Refinancing from one lender to another later means paying fresh LMI if you're still above 80% LVR.
Can I transfer LMI between lenders?
No. LMI is lender-specific. If you might want to refinance soon, factor that into your choice of lender, because switching too quickly can mean paying LMI twice.
How is LMI calculated?
It's based on the loan amount, the LVR tier and the insurer's rate table. The jump from 80% to 85% is modest; 90% to 95% is where the premium gets meaningful. Use our LMI calculator for a rough figure.

Related pages

First home buyersGuarantor loansLMI calculator
General advice disclaimer. The information on this page is general in nature and does not take into account your personal objectives, financial situation or needs. You should consider whether it is appropriate for you before acting on it, and seek professional advice where relevant.

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