How to avoid paying LMI


For loans more than 80 percent of the property’s purchase price, the borrower will most likely be required to pay lenders mortgage insurance (LMI). When a bank considers a loan to be a higher risk, LMI is likely to be payable. If you want to avoid the costly premium, here are some alternatives to consider.

Save a higher deposit

Lender’s mortgage insurance protects the lender in the case that the borrower neglects their repayments, and is payable when the loan is greater than 80 percent. A larger deposit will decrease your loan amount. Therefore the loan to value ratio (LVR) will decrease along with the perceived risk, thus, avoiding LMI.

Get a guarantor

If saving for a 20 percent deposit is something you don’t think you can achieve within your goal time frame, however, you still want to avoid that hefty insurance premium, having a guarantor on the loan could be an option for you. Read more about Family Guarantees here.

Take advantage of professional benefits

The industry you work in may come with some additional benefits when it comes to securing your home loan. Certain professionals, such as doctors and accountants may be able to get the LMI waived by some lenders. Due to their perceived stability and high income, some lenders consider these professionals ‘low risk’ and will offer exclusive benefits.

A little insider knowledge from a finance broker will go a long way in helping you find a loan that won’t require you to fork out for LMI. If LMI is something you want to avoid, feel free to get in contact with us.