Lenders mortgage insurance for investors — plain English

Lenders mortgage insurance is a one-off insurance premium a lender charges when it considers a loan higher risk — typically when you are contributing less than about 20 per cent of the property's value as deposit or equity. The policy protects the lender if the loan is not repaid and the property sells for less than the balance owing.

You pay for it. The lender is the one covered. That's the part people are usually surprised by, so it's worth saying plainly.

The usual trigger is a loan-to-value ratio above roughly 80 per cent. Lenders set their own thresholds and their own premium tables, and some professions and loan types are treated differently. There is no single national rate, and anyone quoting you a precise figure without knowing your lender, loan size and LVR is guessing.

Ask your lender or broker for the actual premium against your actual scenario. We deliberately don't publish premium tables here, because they would be out of date and wrong for most readers.

Paying LMI usually means buying sooner with a smaller contribution. Waiting means saving more, or building more equity, and avoiding the premium — but the market, your borrowing capacity and your circumstances may all look different by then.

• Paying it adds cost, and is often capitalised into the loan, so you pay interest on it.
• It is generally not transferable if you refinance to another lender.
• Waiting avoids the premium but delays rent, growth and the start of the holding period.
• Using home equity instead of cash can sometimes lift the contribution above the threshold — at the cost of more debt.

LMI is one of several upfront items, alongside stamp duty, conveyancing and inspections. Budget it with the rest rather than treating it as a surprise — the upfront costs guide lays them out, and the holding costs estimator covers what happens after settlement.

• The exact premium quoted for your LVR, loan amount and lender.
• Whether it is being capitalised, and what that adds over the life of the loan.
• Whether a slightly larger contribution would drop you under the threshold.
• Whether your serviceability still works with the capitalised amount included.

General information only — not credit or financial advice. We generate interest and pass your enquiry to one independent property specialist, free and with no obligation, who can tell you honestly whether paying LMI makes sense in your position or whether waiting serves you better.