1. Help Center
  2. Financial Planning Guides

What is LMI?

LMI or Lenders Mortgage Insurance is an insurance that protects the lender in the event of the borrower defaulting on the loan.

​That is if there is an event of default and the security property needs to be sold to repay the lenders debt and there is not enough t from the sale to payout the loan LMI will cover that shortfall.

​Important to note this Is not an insurance that protects the borrower, but the lender.

​Ideally you would aim to have enough deposit (20% or more) to avoid lenders mortgage insurance, but practically this is not always possible especially for first home buyers.

​In the case where you have limited deposit and require LMI;

  • ensure you factor as an additional cost or are aware it will increase the amount you borrow.
  • Ensure you have your loan as principle an interest to start repaying the loan from day one and
  • don’t look to purchase property where LMI is required if you plan to hold the property only for a short time, as it will be hard to recover this additional cost in a short time.

​For low deposit home loans a Family or Security Guarantee can assist in avoiding LMI.