Lenders mortgage insurance, explained
LMI is insurance you pay for that protects the lender. It applies when you borrow more than 80% of the value.
What it is
If you borrow more than 80% of a property’s value, the lender takes out insurance against you defaulting and passes the premium to you. It doesn’t protect you: if the home is sold at a loss, the insurer can still pursue you for the shortfall.
What drives the cost
The premium rises with the size of the loan and with the loan-to-value ratio, and it rises in steps. Borrowing 90.01% can cost much more than 89.99%. Lenders usually add the premium to the loan, so you pay interest on it. We get the exact figure from each lender, because premiums differ between them.
Five ways to avoid it
- Save a 20% deposit
- Use the 5% Deposit Scheme if you are an eligible first home buyer
- Use a family guarantee
- Use a professional waiver if your occupation is on a lender’s list
- Buy with MyHome so your own loan is under 80%
When paying it makes sense
LMI can be worth paying if it gets you into the market years earlier, or lets an investor keep cash for the next purchase. It is a cost to weigh, and we put the number in front of you so you can.
Questions people ask
Is LMI refundable if I refinance?
Generally no. If you refinance above 80% with a new lender you may pay it again, which is worth knowing before you choose your first lender.
Is LMI the same as mortgage protection insurance?
No. Mortgage protection covers your repayments if you can’t work. LMI covers the lender.
General information, last updated November 2026. Scheme figures, lender policies and duty rates change, so confirm them before you rely on them.
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