Mortgage insurance percentage
Understanding the mortgage insurance percentage is crucial for Australian home buyers. Learn how Lenders Mortgage Insurance (LMI) is calculated, what factors influence the cost and how it impacts your borrowing power.
Mortgage Insurance Percentage: What You’ll Really Pay
Discover how mortgage insurance percentage is calculated and what it means for your monthly payments. Learn to save on your home loan costs today.
MORTGAGE PERCENTAGE
How is the mortgage insurance percentage calculated?
Lenders Mortgage Insurance (LMI) is charged when your Loan-to-Value Ratio (LVR) is above 80%. It’s not a flat fee, it's a percentage of your loan amount based on risk tiers. Main factors driving the percentage:
LVR: The biggest input. Higher LVR = higher premium. Even a small jump can sharply increase the percentage.
Loan amount: Larger loans attract higher total premiums, though the percentage doesn’t rise evenly across all loan sizes.
Loan purpose: Investment properties may use different LMI rate tables.
Borrower profile: Employment stability, credit history and financial risk play a role, though LVR and loan size matter most.
Because each lender and insurer uses its own pricing tables, the mortgage insurance percentage varies widely. A HeyNest broker can model scenarios so you know the exact percentage before you commit.
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Other factors that influence your final percentage
Beyond basic LVR and loan size, these elements can shift your LMI cost:
Lender/LMI provider: Premium tables differ: same loan, different lender, different percentage.
Deposit thresholds: LMI is banded. Dropping from 88% to 85% LVR can place you in a cheaper tier.
Property type and location: Higher-risk postcodes or unusual properties may attract higher premiums.
Capitalising LMI: Adding LMI to the loan doesn’t change the percentage but increases long-term cost because you pay interest on it.
A HeyNest broker compares multiple lenders to secure the lowest available LMI percentage for your situation.
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How to avoid a high mortgage insurance percentage?
The main strategy is lowering your effective LVR:
Reach 20% deposit (80% LVR): Eliminates LMI entirely.
Guarantor loans: A family guarantor’s equity can replace part of your deposit.
First home loan deposit scheme: Eligible buyers can use a 5% deposit with no LMI due to a government guarantee.
Professional waivers: Some lenders waive LMI for certain professions even above 80% LVR.
A local HeyNest broker can assess all available paths, from schemes to exceptions, to help minimise or remove your mortgage insurance cost.
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Frequently asked questions
Is Lenders Mortgage Insurance (LMI) compulsory in Australia?
Yes, it is generally compulsory if your deposit is less than 20% of the property value.
Is the mortgage insurance percentage negotiable?
No, the percentage is determined by the lender's LMI premium table, but a broker can compare tables from multiple lenders to find the lowest cost for you.
Does the LMI premium percentage include Stamp Duty?
No, the LMI premium is calculated separately. However, Stamp Duty may be payable on the LMI premium in some Australian states.
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