Lenders mortgage insurance (LMI) is a one-off premium that usually applies when you borrow more than 80% of the property value. It protects the lender if you cannot repay, but you pay for it, and many lenders let you add it to the loan. The main ways to avoid it are saving a 20% deposit, using the First Home Guarantee (the 5% Deposit Scheme) if you are an eligible first home buyer, getting a family guarantee, or using a lender’s professional package.
None of these is automatic. Each has its own rules, and lenders apply them differently. A waiver is a lender decision, not a right, and approval is always subject to lender policy and your borrowing capacity.
Below is how each option works in general terms, a comparison table, and what to ask before you choose one. If you are still building your deposit, start with how much deposit you need in Sydney.
What is LMI and when does it apply?
LMI is insurance that covers the lender’s loss if you default and the property sells for less than the loan. The cost is passed on to you as a premium, usually paid at settlement or added to the loan balance.
It generally applies when your loan-to-value ratio (LVR) is above 80%. LVR is the loan divided by the property value. A $800,000 loan on a $1,000,000 property is 80% LVR. A $900,000 loan on the same property is 90% LVR and would normally attract LMI.
The premium depends on the LVR, the loan size and the lender, and it rises as your deposit shrinks. Ask for a quote on your own numbers rather than relying on a general figure. Moneysmart’s buying a house guide covers deposits and related costs (checked October 2026).
What is the minimum deposit to avoid LMI?
The simple answer is 20%, which keeps you at 80% LVR. On a $1,000,000 purchase that is $200,000, before stamp duty and other costs.
Some pathways may let you avoid LMI with less than 20%, but only if you meet specific conditions. These include a government scheme for eligible first home buyers, a guarantee from a family member, or a lender package for certain occupations. A smaller deposit also means a bigger loan, higher repayments and less equity to fall back on, so avoiding LMI is not the same as being able to afford the loan.
Is there an LMI exemption in NSW?
No. There is no NSW-specific LMI exemption. LMI is a private insurance product tied to the lender, and it does not change with the state you buy in.
What NSW does offer is separate: transfer duty relief for some first home buyers, and a grant for some new homes, under conditions set by Revenue NSW (Revenue NSW first home buyer scheme, checked October 2026). These can reduce the cash you need to find, but they do not remove LMI. For how the NSW schemes fit together, see first home buyer schemes in NSW.
What are my LMI options on a 10% deposit in NSW?
If you are a NSW first home buyer with around 10% saved, you generally have four paths:
- Pay LMI and add it to the loan, which gets you in sooner but increases your debt.
- Use the First Home Guarantee, if you meet the eligibility rules and your lender and property qualify.
- Use a family guarantee, where a family member offers security over their property to cover part of your loan.
- Check whether your occupation qualifies for a lender’s professional package.
Which one is best depends on your income, your family’s position, the property and the lender. Compare the total cost, not just the LMI line. Our first home buyer service page explains how we approach that comparison.
How does the First Home Guarantee (5% Deposit Scheme) avoid LMI?
The scheme is run by Housing Australia for eligible first home buyers. The Australian Government guarantees part of the loan, so eligible buyers can purchase with a smaller deposit and without paying LMI, through participating lenders (Housing Australia, checked October 2026).
Eligibility, property price limits and participating lenders can change, so check the current rules on the Housing Australia and firsthomebuyers.gov.au pages before you plan around it (checked October 2026). We cover the details in the 5% Deposit Scheme explained.
How does a family guarantee help avoid LMI?
With a family guarantee, a parent or other close family member offers their property as extra security for part of your loan. That lowers the lender’s risk on your loan, which can reduce or remove the need for LMI even with a small deposit.
It has real consequences for the guarantor. They are putting their own property on the line and must understand what happens if you cannot repay. They should get independent legal and financial advice first. Moneysmart explains the risks in its guide to going guarantor (checked October 2026), and our guarantor loans page covers how the structure can work.
Which professions can get an LMI waiver?
Some lenders offer professional packages that waive LMI at a higher LVR for certain occupations, such as some health, legal, accounting and similar professionals. Which professions are eligible, the maximum LVR, income requirements and any package fees vary by lender and change over time, so there is no single list that applies everywhere.
If you work in a profession that might qualify, ask a broker to check current policy across lenders. A waiver can still come with a package fee or a higher rate, so compare the whole cost of the loan, not just whether LMI is waived.
How do the LMI options compare?
| Option | Deposit generally needed | Who it may suit | Main things to check |
|---|---|---|---|
| 20% deposit | 20% of property value | Buyers who can save longer | Time to save, cash left after settlement |
| First Home Guarantee (5% Deposit Scheme) | Smaller than 20%, set by scheme rules | Eligible first home buyers | Eligibility, price limits, participating lenders |
| Family guarantee | Often small, depends on lender | Buyers with family willing to guarantee | Risk to the guarantor, lender rules, legal advice |
| Professional package waiver | Lower than 20%, depends on lender | Some professions | Eligible professions, LVR limit, income test, package fees |
| Pay LMI | Whatever deposit you have | Buyers who want to enter sooner | Premium cost, added debt, interest on the premium |
Use the buying and selling costs calculator to see how LMI sits alongside the other costs of buying.
Is paying LMI ever the right choice?
Sometimes. If you have a stable income, a clear repayment plan and the market is moving faster than you can save, paying LMI can get you into a home sooner. Others prefer to wait and avoid the added cost and loan size.
Neither choice is wrong in itself. The right one depends on your cash flow, buffer, goals and the lender’s policy. A broker can model the numbers with and without LMI. If you are a first home buyer with a smaller deposit, speak to us about which options may fit.