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What is lenders mortgage insurance, what does it cost, and can I add it to my loan?

Bayley Clarke · Mortgage broker on the road · Last checked 1 September 2026 · 4 min read

The two minute version. The rest of this page is the detail underneath it.

Why nobody can quote you a number off the bat

I went through the policy books of the thirty-odd lenders I work with looking for a simple LMI price list, and here's the honest finding: not one of them publishes a premium rate card. The premium is set by the insurer behind the loan, worked off your loan size, your loan to value ratio and the type of borrower you are, and it's quoted per deal. That's why every online LMI calculator gives you a different figure, and why none of them match the number that comes back on your actual application.

What I can tell you is the shape. Just over 80% of the property value, the premium may not be all that much. From 80 towards 90 it creeps up on a sliding scale. Above 90 it starts getting up there, and on a 95% loan it can land anywhere between 20 and 30 thousand dollars. That's a lot of money for something that protects the bank and not you.

Where lenders charge their own fee instead of an insurer's premium, the few published schedules run around one percent of the loan just above 80%, and around two percent as you approach 90%. That's a useful sanity check for any quote you're given.

Not every lender charges it the same way

Across the panel there are actually three different versions of this cost, and which one you get depends entirely on the lender. Most run the classic model: an insurance premium, either through one of the big mortgage insurers or an insurance arm the bank owns itself. A handful skip the insurer and charge their own once-off risk fee instead, which does the same job under a different name. And a small number charge nothing at all up to 90% for the right borrower, pricing the risk elsewhere in the deal.

Same deposit, same property, and the once-off cost can range from tens of thousands to zero depending on which door you walk through. This is one of those places where lender selection is quietly worth more than rate shopping.

Adding it to the loan: the fine print that moves real money

Yes, at almost every lender the premium can be capitalised, which means added to the loan instead of paid in cash at settlement. Most people do it, because the whole reason LMI is in play is that the deposit was tight. The trade-off is you're paying interest on a once-off fee over a 30 year term, which adds up.

Here's the detail I checked lender by lender, because it changes how much you can actually borrow: at most lenders the stated maximum loan already includes the premium, so capitalising it eats into your borrowing rather than adding to it. At a decent handful the premium sits on top of the cap, taking the true loan past 95, sometimes to 97 or 98 percent of the value. And a couple will go all the way to 100 percent of the property value once the premium is loaded on. On a typical first home purchase, the difference between those treatments is worth tens of thousands of dollars of loan, from the same deposit.

The three exits: check these before you pay it

You only pay LMI if all three of these are off the table. First, occupation waivers: a decent share of lenders will waive LMI entirely up to around 90% for certain professions, healthcare and professional occupations mostly, and every bank's list is different. Second, the government 5% deposit scheme: if you're eligible, the government guarantee replaces LMI altogether. Third, a guarantor: if family can offer security, LMI disappears because the bank isn't short on cover.

That's the real order of operations. LMI isn't a default cost of buying with less than 20%. It's the cost that's left when none of the exits fit, and part of my job is checking all three before anyone pays it.