Welcome 

You might have heard of Lenders Mortgage Insurance, often just called LMI. It can be a great option to help you purchase your property sooner, but there are also costs to consider. We’re here to make it as easy as possible for you to understand your options, so you can feel confident about your home loan and make the right choice for you.

Our beginners guide to LMI

Buying a home is a big investment and saving for your deposit is an important first step. When it comes to getting your loan, the amount of your deposit may impact whether LMI is required. What exactly is LMI, what does it cost and why would you need it? Let’s walk you through LMI.

Step 1: 
Understanding LMI

What is Lenders Mortgage Insurance?

Lenders Mortgage Insurance protects your lender against the risk of lending to you. If you default on your loan and your lender needs to sell your property, they’re covered if the amount they receive from the sale of your property is less than the total amount still owing on your loan. In other words, it’s an insurance policy so the bank won’t be out of pocket if things don’t go to plan.

When do I need LMI?

Lenders compare the value of your home with the amount of your loan to help them assess the risk of your loan. It’s called Loan to Value Ratio, or LVR for short. Lenders Mortgage Insurance is generally only required if you need to borrow more than 80% of the value of your home (that’s more than 80% LVR), as your loan is a greater risk to your lender. There may be other circumstances where LMI is also required.

What LMI isn’t

LMI shouldn’t be confused with Mortgage Protection Insurance or Credit Protection Insurance which may cover your mortgage repayments in the event of death, sickness, unemployment or disability. These insurances cover you personally whereas LMI covers your lender, although you do still cover the costs.

Here’s an example of how it might work in action.

Brian and Abi have found a home they want to buy for $500,000. Typically, they would need a 20% deposit ($100,000) to secure a loan from the bank. However, Brian and Abi only have $50,000 saved for a deposit. As they have sufficient income to support the loan, by purchasing Lenders Mortgage Insurance they can borrow $450,000 to buy a new home. This means they can secure a home loan sooner with a 10% deposit ($50,000) and stop paying rent. 

Step 2: Understanding your costs

What does Lenders Mortgage Insurance usually cost?

LMI isn’t one size fits all – it’s calculated based on how much you borrow. Typically, the higher your LVR, the greater the cost of LMI. If LMI applies, your lender will advise how much it will cost and discuss your options.

How is Lenders Mortgage Insurance paid?

LMI is a one-off cost that’s paid to the LMI provider (through your lender) at settlement. You can pay it up front or capitalise it to your loan, meaning it’s added to your total loan amount and repaid over time as part of your loan repayments. Capitalising it to your loan is an easy way to avoid an extra cost at the start of your loan, but it does mean you’ll pay more in interest over time as it increases the amount of your loan.

Step 3: Deciding if LMI is right for you

Choosing to get a loan with LMI is a personal decision. LMI allows you to reduce the deposit you need to get a home loan, but you should always consider what best suits your circumstances.

What difference can using LMI make?

Lenders Mortgage Insurance might allow you to:

  • purchase a home sooner by taking out a home loan with a smaller deposit
  • borrow a loan amount in excess of 80% LVR
  • enter the housing market and start growing equity
  • stop paying rent
  • have greater flexibility through your home buying journey

What else is there to know?

LMI is a non-refundable cost. So even if you reduce your LVR below 80% after settlement or you pay off your loan early, you’re still liable for the full LMI cost.

Are there other options to Lenders Mortgage Insurance?

Remember, LMI typically only applies if your LVR is greater than 80%. So, if you’d like to avoid LMI, you should aim to save a deposit that’s 20% of the value of the property you want to buy. Just don’t forget to factor in also saving for extra costs you may need to cover, such as stamp duty and conveyancing fees.

If you don’t have a 20% deposit, you may be able to avoid LMI if you have a guarantor – someone (like a family member) who agrees to guarantee your loan repayment. That means they are liable for the loan if you default.

 

Get home sooner with our $1 LMI offer+

Whether its your  first home or first investment property, we have an exciting offer to help you purchase your property sooner. For new customers making their first property purchase, we’re offering $1 Lenders Mortgage Insurance for eligible home loans up to $1,000,000 with a deposit as low as 15% (subject to credit and other eligibility criteria). 
Enquire online

To be eligible for the offer, you will need to meet the following eligibility criteria:

  • Loan must be for the purchase of your first home to live in or for investment (excludes construction)
  • All borrowers must be individuals and first home buyers
  • Maximum loan amount is up to $1,000,000
  • Loan to value ratio (LVR) must be between 80.01% to 85%
  • Single security only
  • Principal and interest repayments only (excudes interest only)
  • Available on BOQ's Clear Path, Intro Rate or Fixed Rate Home Loans

Full terms and conditions can be found in the Important Information section of this page.

 $1 LMI offer rates for Owner Occupier+

  • Owner Occupier Variable Rate Home Loan
    $1 LMI Offer and LVR of 80.01% to 85% Principal and Interest

     

    Annual Percentage Rate %

    Comparison Rate %^

    Intro Rate Home Loan - $150,000 - $1,000,000

    2.84 for first 2 years then 3.09 3.19
    Clear Path Variable Rate Home Loan - Up to $499,999 3.04 3.19

    Clear Path Variable Rate Home Loan - $500,000 - $799,999

    2.94 3.09
    Clear Path Variable Rate Home Loan - $800,000 - $1,000,000 2.89 3.04
     
     
     
     
     
     
  • Owner Occupier Fixed Rate Home Loan
    $1 LMI Offer and LVR of 80.01% to 85% Principal and Interest

     

    Annual Percentage Rate %

    Comparison Rate %^

    1 Year Fixed Rate Home Loan - Up to $1,000,000

    2.64

    3.21

    2 Year Fixed Rate Home Loan - Up to $1,000,000

    2.34

    3.13

    3 Year Fixed Rate Home Loan - Up to $1,000,000

    2.54

    3.12

    4 Year Fixed Rate Home Loan - Up to $1,000,000

    2.94

    3.21

    5 Year Fixed Rate Home Loan - Up to $1,000,000

    3.04

    3.23

     
     
     
     
     
     

 $1 LMI offer rates for Investor+

  • Investor Variable Rate Home Loan
    $1 LMI Offer and LVR of 80.01% to 85% Principal and Interest

     

    Annual Percentage Rate %

    Comparison Rate %^

    Intro Rate Home Loan - $150,000 - $1,000,000

    3.09 for first 2 years then 3.27

    3.38

    Clear Path Variable Rate Home Loan - Up to $499,999

    3.24

    3.38

    Clear Path Variable Rate Home Loan - $500,000 - $799,999

    3.14

    3.29

    Clear Path Variable Rate Home Loan - $800,000 - $1,000,000

    3.09

    3.24

     
     
     
     
     
  • Investor Fixed Rate Home Loan
    $1 LMI Offer and LVR of 80.01% to 85% Principal and Interest

     

    Annual Percentage Rate %

    Comparison Rate %^

    1 Year Fixed Rate Home Loan - Up to $1,000,000

    2.99

    3.41

    2 Year Fixed Rate Home Loan - Up to $1,000,000

    2.74

    3.34

    3 Year Fixed Rate Home Loan - Up to $1,000,000

    2.94

    3.35

    4 Year Fixed Rate Home Loan - Up to $1,000,000

    3.24

    3.42

    5 Year Fixed Rate Home Loan - Up to $1,000,000

    3.29

    3.44

     
     
     
     
     
     

Our popular loans for buying your first home

Pay off your home loan sooner

Intro Rate Variable Home Loan

A discounted low rate home loan with all the great features including:

  • Owner occupier and investor options available
  • Unlimited free redraw and flexible repayments
  • 100% Mortgage offset account

Know what your repayments are for peace of mind

Fixed Rate Home Loan

A fixed rate home loan gives you the certainty of knowing exactly what your repayments will be for up to 5 years, while protecting yourself against any potential interest rate rises.

  • Owner occupier and investor options available
  • Great interest rates across our range of terms
  • Repayment options available include Principal and Interest repayments and Interest Only repayments

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