Save up to $30,000 on Lenders Mortgage Insurance — here's how

Buying your first home comes with various costs, and one of the biggest is Lenders Mortgage Insurance. Thanks to the Australian Government’s expanded 5% Deposit Scheme, saving on LMI just got easier, with potential savings of up to $30,000.

What is Lenders Mortgage Insurance and why does it matter?

Lenders Mortgage Insurance (LMI) is a one-off premium payable when your deposit is less than 20%. It protects the lender if repayments can’t be made, covering any shortfall if the home sells for less than what you owe.

With the 5% Deposit Scheme, eligible first home buyers can enter the market with just a 5% deposit and avoid paying LMI, which helps reduce upfront costs significantly. For example, on a $600,000 home with a 10% deposit, LMI might cost around $14,000, increasing your initial expenses.

How does borrowing with a 95% loan-to-value ratio affect you?

With the 5% Deposit Scheme, eligible buyers can enter the market with just a 5% deposit — borrowing 95% of the property’s value. This means skipping the usual 20% deposit requirement.

These are key points to consider:

• You’re responsible for the full 95% loan amount. If repayments aren’t met, you remain liable for this debt.
• The government guarantee supports lenders only — it doesn’t own your property or take over your loan if things go wrong.
• You must live in the property as your main home for the length of your loan. This is a core condition of the scheme and LMI eligibility.

How much you can save on LMI

Lenders participating in the scheme offer reduced Lenders Mortgage Insurance (LMI) premiums, letting you keep more cash upfront. Savings depend on your loan size and property price.

Here’s an example for a $650,000 House & Land Package:

For higher-priced properties, here’s an example where LMI savings can reach $30,000:

These substantial savings free up your finances for other priorities like stamp duty, moving costs, or home improvements.

LMI is your responsibility — so what happens if you default?

While the scheme offers great benefits, remember that LMI supports the lender — not you. If you default on your home loan:

• You’re still responsible for the full loan balance (the 95% you borrowed).
• The government doesn’t take ownership of your property or your loan.
• LMI covers losses for the lender, but your debt remains.
• Defaulting affects your credit and future borrowing options.

With that said, borrowing at 95% loan-to-value means planning carefully and committing to your repayments.

One step closer to your first home

For many first home buyers, Lenders Mortgage Insurance has been a significant barrier. The 5% Deposit Scheme offers an important opportunity to lower or even avoid these costs. With less to pay upfront, you can focus on what matters most — settling into your new home.

If you want to learn more about LMI and the deposit scheme, read more here: http://thetalk.au/.

Disclaimer: The contents in this article including prices, all government incentives, grants, and schemes are subject to eligibility criteria, availability, and may change or be withdrawn at any time. All property purchases are subject to terms, conditions and eligibility requirements. Purchasers must make and rely on their own enquiries and seek independent professional advice before making any financial decisions. Please refer to relevant government sources for the most current information. Government grants, incentives and eligibility criteria are determined by relevant Federal and State authorities and are subject to change.

For further information, please refer to:

• Australian Government 5% Deposit Scheme details
• First Home Owner Grant eligibility