LMI for First Home Buyers: Pay It or Avoid It?

By Jason Given - 2026-08-14 - 7 min read

What LMI actually is - and why you pay for insurance that protects the bank

Lenders Mortgage Insurance is one of the most misunderstood costs in home buying. The name suggests it protects you - it does not. LMI protects the lender if you default on your loan and the sale of your property does not cover the outstanding balance. You pay the premium, but the bank is the beneficiary.

LMI is required when your deposit is less than 20% of the property value - meaning your loan-to-value ratio (LVR) is above 80%. The higher your LVR, the more LMI costs. It is a one-off cost, not an ongoing fee. You either pay it upfront at settlement or add it to your loan balance (capitalise it).

The two LMI providers in Australia are Helia (formerly Genworth) and QBE. Different lenders use different providers, and their premiums vary - sometimes by thousands of dollars for the same loan. This is one of the reasons working with a broker matters: we know which lender charges the least LMI for your specific deposit level.

What LMI costs in Adelaide - real examples

Here is what LMI looks like on a $600,000 property at different deposit levels. These are indicative ranges - your actual cost depends on the lender, loan amount, and LMI provider.

Use our LMI calculator for an estimate based on your exact property price and deposit.

Every way to avoid LMI as a first home buyer

You do not have to pay LMI. There are four main pathways to buying your first home without it:

• 1. First Home Guarantee. The federal government guarantees the gap between your 5% deposit and 20%, so the lender does not require LMI. You buy with just 5% deposit and no insurance premium. Income caps apply - $125,000 for singles, $200,000 for couples. Places are limited each financial year. Lendology manages the full application and knows which panel lenders have remaining places.
• 2. Family guarantee. A parent or family member uses equity in their property as additional security for your loan. You can buy with 5% deposit - or even no deposit at all - without paying LMI. The guarantor does not give you money and does not go on your loan. They provide a limited guarantee that is released once you reach 80% LVR through repayments and property growth. This is one of the most common pathways we arrange for first home buyers in Adelaide.
• 3. Save 20% deposit. The traditional path. No LMI premium, and you typically qualify for a better interest rate. The downside is time - saving an additional $60,000-$90,000 takes most first home buyers 2-3 extra years, during which property prices may rise more than your savings.
• 4. Professional LMI waiver. Some lenders waive LMI for specific professions - typically doctors, dentists, lawyers, accountants, engineers, and allied health professionals - borrowing up to 85-90% LVR. The eligibility criteria vary between lenders. Lendology knows which lenders offer this and their specific profession lists, so we can tell you quickly whether you qualify.

The real question: pay LMI and buy now, or wait?

This is the decision most first home buyers agonise over. The answer depends on two numbers: how long it would take you to save to 20%, and how fast property prices are rising in Adelaide.

Here is an example that shows why it matters:

Scenario: $600,000 property. You have $60,000 saved (10% deposit).

• A.Pay approximately $10,000 in LMI and buy now.
• B.Save for 2 more years to reach $120,000 (20% deposit) and avoid LMI.

If Adelaide property prices grow at 6% per year, that $600,000 property costs approximately $674,000 in two years. You saved $10,000 by avoiding LMI, but the property now costs $74,000 more. Net result: waiting cost you $64,000.

This does not mean paying LMI is always the right answer. If prices are flat and you can save quickly, waiting may make sense. But in a growing market - which Adelaide has been for several years - paying LMI and buying sooner is often the better financial outcome.

If you do pay LMI - how to minimise it

If LMI is part of your strategy, there are ways to reduce the cost significantly:

• ✓Choose a lender with lower LMI premiums. LMI costs vary by thousands of dollars between lenders for the same loan. Some lenders self-insure with significantly lower premiums than Helia or QBE. Lendology compares the LMI cost across all available lenders for your specific scenario.
• ✓Increase your deposit by even 1-2%. LMI drops significantly at each LVR threshold - 85%, 90%, 95%. Moving from 89% LVR to 85% LVR could save you $3,000-$5,000 in LMI. If you are close to a threshold, it is worth finding that extra money.
• ✓Capitalise it into the loan if cash is tight. Most lenders allow LMI to be added to your loan balance so you do not pay it upfront. The trade-off is extra interest over the life of the loan - on a $10,000 LMI premium capitalised over 30 years at 6%, you pay approximately $11,500 in additional interest. But it preserves your cash for other settlement costs.
• ✓Ask about lender promotions. Some lenders periodically offer reduced or waived LMI as part of promotional campaigns. Lendology monitors these and will flag any current offers that apply to your situation.