The Pros and Cons of Lender’s Mortgage Insurance.

As the value of homes has steadily increased over the years, more borrowers have turned to Lender's Mortgage Insurance (LMI) to help get them onto the property ladder.

However, many borrowers are often confused about Lender's Mortgage Insurance, who and what it actually protects and what the benefits might be.

Lender’s Mortgage Insurance is a one-off upfront payment applicable when a borrower is unable to provide a 20 per cent deposit. LMI can be an incredibly valuable tool if you have the borrowing capacity to purchase a property, but you’re only able to provide a smaller deposit.

Lenders normally like to see a 20 per cent deposit because this protects them in the event the value of the property falls, the borrower runs into financial trouble and defaults on their loan repayments. If a lender had to sell the property, they are taking on more risk if the borrower didn’t have an equity buffer in place.

Advantages of LMI

Buying sooner

The most obvious benefit of paying LMI upfront is that you’re able to get into a home sooner than you would otherwise.When home prices are rising, they are often moving at a faster pace than many people can save. That means you’re getting further and further behind. The sooner you’re able to get into the market, the quicker you’ll stop losing the battle against rising home prices.

A better property

When using LMI you can potentially afford to purchase a better-quality home in a better location, compared to putting down a 20 per cent deposit.

Disadvantages of LMI

Cost

The biggest issue for most people who are looking at LMI is the cost. LMI will vary depending on the size of your mortgage, the value of the property and the location. Typically, LMI costs can run into tens of thousands of dollars. While there is an upfront cost, you have to weigh up those costs against sitting on the side-lines and potentially paying a higher price for your home.

A larger loan

By putting down a smaller deposit, you’re going to have a larger loan. Lenders will assess you based on your ability to service the debt, however, when you use LMI, you’ll be taking on a higher level of debt. And because you have less equity tied up in the property, should property values move against you, there is more risk.

Get in touch.

Our holistic approach to taxation, accounting and financial planning means we bridge the
gap in the client experience, eliminating the frustration from delays that are often inevitable
with multiple stakeholders involved in the lending process.

CONTACT US CONTACT US

2026 EXPRESSIONS OF INTEREST - Skybots: RPA & A.I - 2-Days Training Course

2 Feb '26

After overwhelming demand and sold-out sessions in Perth, Brisbane, Sydney, Melbourne and Mornington in 2025, we’re inviting expressions of interest for 2026. If you missed out earlier or are ready to dive into hands-on automation training, we’re considering additional sessions in various locations across Australia in 2026.

Read More

UNDER THE HOOD: Accessibility and Inclusion with MP Shire Business

18 Dec

Excellence in Inclusivity and Accessibility recognises businesses for their leadership in creating welcoming, inclusive spaces and ensuring accessibility for all. In this episode, the award-winnings share how inclusion isn’t just the right thing to do - it’s a smart business move.

Read More

UNDER THE HOOD: Connected Communities - The Small Business Advantage

18 Dec

The Local Community Connection Award recognises businesses with a commitment to strengthening the Mornington Peninsula community through networks, partnerships and social contributions. This episode features the award-winners as they share practical strategies, proven approaches, and inspiring stories that show how community connection isn’t just good for people - it’s sound business practice.

Read More