How can I avoid paying Lenders Mortgage Insurance in Australia?

There is no single way to avoid Lenders Mortgage Insurance (LMI) — there are three verified paths, and which one is available to you depends on your deposit, your family circumstances, and whether you qualify for a government scheme. LMI is a one-off insurance premium a lender usually requires when you borrow more than 80% of a property’s value. It protects the lender if you default — not you, and not anyone who guarantees your loan. Our guide to what Lenders Mortgage Insurance is and how it works covers the mechanics in full.

What actually triggers LMI

Lenders mortgage insurance usually becomes payable once the amount you borrow exceeds 80% of the property’s value — in other words, once your loan-to-value ratio (LVR) goes above 80%. Below that line, most lenders don’t require it.

LVR = (loan amount ÷ property value) × 100

A loan of $600,000 on an $800,000 property is a 75% LVR — under the 80% line. A loan of $720,000 on the same property is 90% — comfortably above it, and LMI would usually apply. Moneysmart is explicit that this insurance “protects the lender, not you” if the loan isn’t repaid.

Path one: reach 80% LVR with a bigger deposit

The most direct way to avoid LMI is to keep your LVR at or below 80% — in practice, a deposit of roughly 20% of the purchase price plus enough to cover other upfront costs. This isn’t a rule anyone enforces on you; it’s simply the point at which most lenders stop requiring the insurance. Saving a larger deposit takes longer, and how long depends entirely on your income, expenses and the property price you’re targeting — there’s no shortcut that suits everyone. See our guide to how much deposit you need for a first home in Australia for the fuller picture on deposit sizes.

Path two: a guarantee from a family member

A family member — usually a parent — can offer equity in their own property as security for part of your loan. This is sometimes enough to bring your effective LVR under 80% without you needing the full 20% deposit yourself, because the lender’s assessment of your loan-to-value position changes when a portion is backed by the guarantor’s property. It’s a real commitment on the guarantor’s side: their property is at risk if repayments aren’t met, and the arrangement should never be entered into without both the borrower and the guarantor getting their own, independent legal and financial advice. It is one option among several, not a step to take lightly.

Path three: the Home Guarantee Scheme (the 5% Deposit Scheme)

The federal government runs a scheme — rebranded from 1 October 2025 as the Australian Government 5% Deposit Scheme — where eligible buyers purchase with a deposit as low as 5% (2% for single parents or single legal guardians) while the government guarantees part of the loan, so no LMI is payable. Since the scheme’s expansion on 1 October 2025, there are no income caps and no limit on the number of places, and property price caps apply and vary by state and region (as at July 2026). Eligibility still depends on things like being a first home buyer (or not having owned property in the past 10 years), buying as an owner-occupier, and the property price sitting under the relevant cap. See our guides to how the 5% Deposit Scheme works and buying a house in Australia with a 5% deposit for the detail.

Path four: some lenders waive LMI for certain professions

A handful of lenders publish policies that waive or discount LMI for borrowers in specific professions or income brackets, as part of the lender’s own risk assessment rather than any government rule. The detail — which professions, which lenders, and on what conditions — is set by each lender individually and changes over time, so it isn’t something this article can confirm as a general fact. If this might apply to you, the place to check is your own lender’s or broker’s current policy, not a general list.

Weighing the four paths

None of these paths is inherently better than another — each comes with its own trade-off:

Path	What it takes	What it doesn’t remove
20% deposit	Time to save; delays purchase	Nothing — it’s the most self-contained option
Family guarantee	A guarantor willing to risk their property	The guarantor’s exposure if you default
Home Guarantee Scheme	Meeting eligibility rules and price caps	The loan itself is not reduced, only the LMI requirement
Profession-based waiver	Working in an eligible profession, if your lender offers one	Confirmed availability — lender policy, not guaranteed

Which path is right for you?

That isn’t something a general article can answer. It depends on how much you’ve saved, whether you have a family member able and willing to act as guarantor, whether you meet a government scheme’s eligibility rules, and what your own lender’s policies allow. A licensed mortgage broker can look at your full financial position and model these options against each other — that conversation, not a generic ranking, is the right next step.

This article provides general information only — see the disclaimer below.