Feb 1, 2026 · Josh · 1 min read
LMI Explained: How to Buy a Home with Under 20% Deposit
Direct answer
Is LMI the cost of buying with under 20% deposit? Yes. Lenders mortgage insurance protects the lender and allows higher loan-to-value lending. However, it adds upfront cost or a higher loan balance, so it only makes sense if the long-term plan supports it.
Understand lenders mortgage insurance before you sign.
Most first-home buyers hear about LMI too late. It changes the true cost of the loan.
What LMI actually covers
LMI protects the lender if the borrower defaults. You pay the premium, but the lender is the beneficiary.
Why lenders require it
Higher loan-to-value lending increases risk. LMI allows lenders to accept a smaller deposit while managing that risk.
When LMI can still make sense
If buying earlier beats waiting years to save the full 20 percent, LMI can be a rational tradeoff. The key is to model total cost, not just the upfront premium.
Related reads
References
FAQ
Does LMI protect me as the borrower?
No. It protects the lender, and you pay the premium.
Can LMI be added to the loan?
Often, yes, which increases the loan balance and total interest paid.
Is LMI always bad?
Not always. It can help you buy sooner if the numbers still work.
About the author
Josh
Finance broker, disciplined trader, and lifter. I document practical systems for risk, training, and discipline so readers can build results that compound.
If this helped you, reach out. I read every message and update the playbook when new data shows up.
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