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Straight Answers · First home
Should I pay LMI or keep saving for 20%?
Bayley Clarke · Mortgage broker on the road · Last checked 1 September 2026 · 3 min read
The short answer
It depends, and it really does. Your 20% savings goalpost is based on today's property prices. In a rising market the goalposts get further away: as property increases, your 20% amount keeps growing, and you end up trying to catch a train that's already left the station.
If you're a first home buyer, the 5% deposit scheme can get you in a lot sooner without LMI. If you've got family who own property, a guarantor can mean no deposit at all. If neither is an option, you just do the numbers: the loan with LMI now, versus how long it takes to save 20% and what happens to prices in the meantime.
The one minute version. The rest of this page is the detail underneath it.
The moving goalpost
Twenty percent of a property is not a fixed number. It's a share of a price that moves. If the market is rising, every month you spend saving, the 20% you're chasing gets bigger too, and your savings rate has to beat the growth just to stand still.
That's the trap in 'just keep saving'. It feels prudent. In a rising market it can mean running after a train that's already left the station.
The two exits that skip the question
If you're a first home buyer, the government 5% deposit scheme can get you in a lot sooner, and it removes the LMI question because the scheme replaces the insurance the bank would otherwise charge. Eligibility and caps are set by Housing Australia and change, so check the current rules before you count on it.
If you've got family who own property, they could go guarantor for you, where in theory you don't need any deposit at all. That one has its own page below.
If neither applies: do the numbers
If none of those two are an option and you've got the choice of paying LMI or waiting to save 20%, you just do the numbers. We look at what the loan would look like with LMI added. We work out roughly how long it would take you to save the 20%. And then we make a judgement call on which way to go.
It all comes down to the numbers. Sometimes the LMI is a fraction of what the property does in the time it would take to save, and sometimes it isn't. Neither answer is the right one until you've seen both on paper.
The honest bit: LMI isn't the enemy, waiting can be
LMI protects the bank, not you, and I'd never call it good value in isolation. But the real comparison isn't LMI versus nothing. It's LMI now versus a bigger deposit later at a bigger price. In a flat market, saving wins. In a rising one, the insurance is often the cheaper of two bad options.
The market call is the part nobody can guarantee, including me. Which is why I'd rather show you both columns than tell you which one to believe.
Want both columns on your numbers?
A 30 minute call. The loan with LMI today, the time it'd take to reach 20%, and whether the 5% scheme or a guarantor takes the question off the table for you. Nothing on your file.
No cost to you. The bank pays me when a loan settles. ยท How I get paid