How to Avoid LMI: 5 Ways to Skip Mortgage Insurance

What Is LMI and How Can You Avoid It?

Lenders Mortgage Insurance can add tens of thousands to the cost of buying, and it protects the lender rather than you. Knowing how to avoid LMI is one of the fastest ways to cut what your first or next home really costs.

Quick Summary

Keep your loan at or below 80% of the property value, or use a government guarantee, a guarantor or a professional waiver to remove the premium.

There are five reliable routes: a bigger deposit, a government guarantee, a guarantor, a professional waiver, or simply borrowing a little less. This guide explains each one and when it applies.

A Loan For You works out which LMI-free path fits your situation before you apply - at no cost to you. Book a free borrowing review.

Key Highlights

LMI protects the lender if you default. It does not protect you, despite being paid by you.
It usually applies when you borrow more than 80% of the property value.
On a $700,000 purchase with a 5% deposit, LMI can run from roughly $20,000 to $35,000.
A 20% deposit is the simplest way to avoid it entirely.
Government guarantees let eligible buyers put down 5%, or 2%, with no LMI at all.
A guarantor using their equity can remove LMI even with a small deposit.
Some lenders waive LMI for certain professions at up to 90% of the value.

Quick Summary

The short answer to how to avoid LMI is to keep your loan at or below 80% of the property value, or to use a government guarantee, a guarantor, or a professional waiver that removes the premium entirely.

LMI is not automatically a bad thing. Sometimes paying it and buying two years earlier beats saving longer. But you should always know whether you had a way to avoid it.
Philip Jenkins, A Loan For You

How to Avoid LMI: The Five Routes

Route	Deposit needed	Who it suits
20% deposit	20%	Buyers who can save the full amount
Government guarantee	5%, or 2%	Eligible first home buyers and single parents
Guarantor loan	Little or none	Buyers with family equity support
Professional waiver	10% to 15%	Certain listed professions
Borrow less	20% of a lower price	Buyers willing to adjust their target

What Lenders Mortgage Insurance Actually Is

Lenders mortgage insurance is a one-off premium charged when your deposit is small. If you default and the sale does not cover the debt, the insurer pays the lender the shortfall.

You pay the premium, but you are not the one insured. The insurer can still pursue you for the shortfall afterwards, which surprises many borrowers.

The premium is usually calculated from two things: the size of your loan, and how far above 80% of the property value you are borrowing. Small changes in either can move the figure noticeably.

It is triggered when you borrow above 80% of the property value.
The premium rises sharply as your deposit gets smaller.
It is usually added to the loan, so you pay interest on it too.

Route 1: Save a 20% Deposit

The simplest answer to how to avoid LMI is to reach 80% borrowing. On a $700,000 home, that means a $140,000 deposit plus your buying costs.

It is clean and it needs no scheme or third party. The catch is time: saving that much can take years, during which prices may rise faster than your savings.

Work out your target with our deposit calculator, and see how deposits compare in our guide to a house deposit.

Route 2: Use a Government Guarantee

Government guarantee schemes are the most powerful option for eligible buyers. The government guarantees the gap to 20%, so the lender does not require insurance.

First Home Guarantee: buy with a 5% deposit and no LMI.
Family Home Guarantee: eligible single parents can buy with 2%.
Regional First Home Buyer Guarantee: 5% for eligible regional purchases.

Our full guide to the First Home Guarantee covers eligibility, price caps and how to secure a place through a panel lender.

How to Avoid LMI With a Guarantor

A guarantor, usually a parent, offers equity in their own property as additional security. That lifts your effective deposit above 20% without cash changing hands.

You can often buy with little or no deposit of your own.
The guarantee is usually limited to a set portion, not the whole loan.
It can be released once you build enough equity, often in a few years.

A guarantor takes on real risk, so it is worth them getting independent legal advice before signing anything.

Route 4: Professional LMI Waivers

Some lenders waive mortgage insurance for borrowers in specific occupations they consider lower risk, often at up to 90% of the property value.

Medical professionals are the most widely accepted category.
Some lenders extend waivers to legal, accounting and other professions.
Criteria vary a lot between lenders, including minimum income tests.

An LMI waiver is not advertised loudly, so it is worth asking a broker whether your occupation qualifies with any lender on their panel.

Route 5: Adjust What You Borrow

Sometimes the cleanest fix is arithmetic. If you are close to 80%, a slightly cheaper property or a slightly larger deposit gets you over the line.

Compare the LMI premium against the extra you would need to save.
Check whether a marginally lower purchase price removes it entirely.
Ask what the premium is at 85% versus 80%, as the difference can be large.

When Paying LMI Is Worth It

Avoiding LMI is not always the right call. In a rising market, waiting two years to save more can cost more than the premium would have.

Buying sooner may beat further price growth and continued rent.
The premium can usually be added to the loan rather than paid upfront.
You can refinance later once you have built equity beyond 20%.

Run both scenarios before deciding. Our guide to first home buyer deposits compares buying now against saving longer.

Things People Get Wrong About LMI

A few misunderstandings about how to avoid LMI cost buyers real money.

It insures the lender, not you, even though you pay for it.
It is generally not transferable if you refinance to a new lender.
Capitalising it into the loan means paying interest on it for years.
Some insurers offer a partial refund if the loan ends very early.

Frequently Asked Questions

How can I avoid paying LMI?

The main answers to how to avoid LMI are: save a 20% deposit, use a government guarantee such as the First Home Guarantee, use a guarantor, or qualify for a professional waiver. Each keeps your effective borrowing at or below 80%.

What is LMI and who does it protect?

Lenders mortgage insurance is a one-off premium charged when you borrow more than 80% of a property’s value. It protects the lender if you default and the sale does not clear the debt. You pay it, but you are not insured by it.

How much does LMI cost?

It depends on your deposit and loan size, and rises sharply as the deposit shrinks. On a $700,000 purchase with a 5% deposit, it can run from roughly $20,000 to $35,000, usually added to the loan.

Do I need a 20% deposit to avoid LMI?

Not always. A 20% deposit is the simplest route, but government guarantee schemes let eligible buyers put down 5%, or 2%, with no LMI. A guarantor or a professional waiver can also remove it.

Can a guarantor help me avoid LMI?

Yes. A guarantor offers equity in their property as extra security, lifting your effective deposit above 20%. The guarantee is usually limited to a portion of the loan and can be released once you build equity.

What is an LMI waiver?

Some lenders waive mortgage insurance for borrowers in occupations they view as lower risk, often up to 90% of the value. Medical professionals are most widely accepted, with some lenders including legal and accounting fields.

Is LMI refundable if I sell or refinance?

Generally no, though some insurers offer a partial refund if the loan is discharged very early, usually within the first year or two. It is also not normally transferable if you move to a different lender.

Is it ever worth paying LMI?

Often, yes. If prices are rising faster than you can save, buying two years earlier with a smaller deposit can leave you better off overall, even after the premium. Compare both scenarios with a broker before deciding, since the answer depends on your income and timeline.

Talk to a Brisbane Home Loan Specialist

Working out how to avoid LMI in your situation takes ten minutes with the right broker. A Loan For You checks every route, from guarantees to waivers, before you apply.

Free, no-obligation review of your deposit and LMI position.
Access to 50+ lenders, including guarantee and waiver options.
Local Brisbane brokers serving Chermside, Redcliffe, North Lakes and beyond.

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Reviewed and Verified

This guide was reviewed by Philip Jenkins, principal broker at A Loan For You (Credit Representative 365865). With almost 20 years structuring loans to minimise costs for Brisbane buyers, Philip keeps every figure aligned with current lender policy.

General information only, correct as at July 2026. Premiums, waivers and scheme rules change - confirm your own numbers with your broker and read independent guidance on LMI at Moneysmart before you act.