How to Avoid LMI in Australia: 7 Practical Strategies

Lenders Mortgage Insurance (LMI) is typically charged when your deposit is under 20% of the property value (LVR above 80%). It can add $5,000–$40,000+ to the cost of buying a home — and it protects the lender, not you. Here are seven legitimate ways to reduce or avoid it.

Use our LMI Calculator to estimate the premium for your scenario, then work through the strategies below.

1. Save a 20% deposit

The simplest way to avoid LMI is to keep your loan-to-value ratio (LVR) at or below 80%. On a $700,000 property that means a $140,000 deposit (plus stamp duty and other costs).

If you’re close to 80% — say at 82% LVR — even a modest extra contribution can move you under the threshold and remove LMI entirely. Use the Borrowing Power Calculator to model how a larger deposit changes your borrowing position.

2. First Home Guarantee (FHBG)

Eligible first home buyers can purchase with as little as 5% deposit without paying LMI through the federal government’s First Home Guarantee scheme. Place numbers are limited each financial year and there are property price caps that vary by state and region.

Eligibility highlights:

• Australian citizen, 18+, single income ≤ $125k or joint ≤ $200k
• Owner-occupier purchase (you must move in)
• Property within the relevant price cap

Read more in our LMI for First Home Buyers guide.

3. Professional LMI waivers

Several lenders offer LMI waivers up to 90% LVR — and a few up to 95% — for borrowers in approved professions:

• Doctors, dentists, vets (often up to 95% LVR with no LMI)
• Lawyers, accountants, actuaries (commonly up to 90%)
• Engineers, mining professionals, IT executives (varies by lender)

Income thresholds and lender lists change frequently. A broker can confirm whether your role qualifies and which lender offers the best terms for your situation.

4. Guarantor home loan (family pledge)

A parent or close family member can use equity in their property as security, allowing you to borrow up to 100% of the purchase price (plus costs) without LMI. The guarantor is liable for a portion of the loan — often only the portion above 80% LVR — and is released once you’ve paid the loan down to the 80% level.

This is one of the most common ways young Australians enter the market without years of saving, but it carries real risk for the guarantor. Independent legal advice is required.

5. Parental gift (genuine savings)

If parents can gift you part of the deposit to push you over 20%, you avoid LMI altogether. Most lenders require:

• The gift to be non-refundable (a statutory declaration is common)
• Some evidence of genuine savings of your own (typically 5%)
• The gift to be in your account before settlement

6. State-based shared equity schemes

Some states run shared equity programs that contribute toward your deposit in exchange for a share of the property. Examples include:

• Help to Buy (federal scheme — up to 40% equity contribution)
• Victorian Homebuyer Fund (Vic — up to 25%)
• Keystart (WA — low deposit options for eligible buyers)

These schemes typically remove the need for LMI because the government share reduces your effective LVR.

7. Capitalise LMI strategically (when avoidance isn’t practical)

If you can’t avoid LMI but want to keep cash for renovations or a buffer, you can capitalise LMI into the loan. You’ll pay interest on it for the life of the loan, but you preserve liquidity at settlement. See our Capitalised LMI Explained guide for the full cost trade-off.

Which strategy is right for you?

Situation	Best strategy
Close to 20% deposit	Save the gap; check professional waiver
First home buyer, low deposit	First Home Guarantee + state schemes
Doctor/dentist/lawyer	Professional waiver
Family willing to help	Guarantor or gift
Investor at 90% LVR	Compare LMI cost vs delaying to 80%

Run your numbers through the LMI Calculator first — sometimes the LMI premium is small enough that paying it (and buying sooner) makes more sense than waiting two years to save the gap.

Key caution

LMI policy and scheme eligibility change frequently. The premium tables used in our calculator are indicative — confirm exact figures with your lender before signing any contract.

Next: LMI for First Home Buyers → Capitalised LMI Explained