If you’re applying for a loan to buy a property, you may come across something called Lenders Mortgage Insurance or LMI. It generally becomes a factor if you have less than 20% of the purchase price available for a deposit.
12 May 2026 – 2-minute read
Lenders Mortgage Insurance helps those providing the loan cover any shortfall if a borrower defaults on their home loan and the proceeds from the subsequent property sale are not enough to pay off the loan.
It’s organised by the lender but is paid for by the person taking out the loan. That person (and/or any guarantor they have) is still liable to pay any shortfall to the insurer if a claim is made by the lender.
Saving the lump sign required to put down a deposit on a home can be very challenging, even if your income is sufficient to cover the home loan repayments. Lenders will generally expect you to have access to a deposit of 20% of the purchase price – but there may be ways that you can get a loan with a smaller deposit.
If you apply for a loan with Westpac, we may agree to a lower percentage if you pay for Lenders Mortgage Insurance. That’s because it reduces our risk should problems occur paying back the outstanding loan balance.
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You may also be asked to pay for LMI if you're refinancing, restructuring a home loan, or topping one up, where the limit of the loan is greater than 80% of the value of the security.
The cost of LMI is calculated based on the size of the loan amount and it’s percentage of the security value. It’ll vary, so it's best to speak to your lender to understand the process in more detail.
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The cost of the Lenders Mortgage Insurance premium is passed on to you, the home buyer, as part of your home loan. As the financial institution providing the loan, Westpac does not receive a commission from the LMI provider.
Lenders Mortgage Insurance is taken out by Westpac where your loan requires it to meet our credit underwriting standards.
The insurance premium is usually a one-off charge and can be included either in your upfront costs and paid immediately, or added to your loan repayments so that it's spread out over the term of the loan. Find out about these options by speaking to your home loan specialist.
If you're considering a home loan and are not sure about what it could cost to maintain, use our repayment calculator to estimate your repayments and our affordability calculator to see what you could afford to borrow.
If you’re unable to raise a 20% deposit, but you meet certain criteria, you may be able to avoid paying LMI. The Australian Government 5% Deposit Scheme, formerly called the Home Guarantee Scheme, is a government initiative designed to help eligible first home buyers, and single parents and legal guardians buy their own homes faster with a smaller deposit. Changes to the scheme from 1 October 2025 waived the need for LMI for participants.
For more information visit the First Home Buyers website.
You may also qualify for an LMI waiver under certain special packages based on your profession, so it's best to speak to your lender.
Lenders Mortgage Insurance should not be confused with Mortgage Protection Insurance, which is an insurance option to cover your mortgage and/or your mortgage repayments in the event of death, disability, unemployment or reduced income. Find out more about mortgage insurance by speaking to your lending specialist.
Conditions, credit criteria, fees and charges apply. Residential lending is not available for Non-Australian Resident borrowers.
This information is general in nature and has been prepared without taking your personal objectives, circumstances and needs into account. You should consider the appropriateness of the information to your own circumstances and, if necessary, seek appropriate professional advice.
Any tax information described is general in nature and it is not tax advice or a guide to tax laws. We recommend you seek independent, professional tax advice applicable to your personal circumstances.