What is LMI and Who Pays for It?

What is Lenders Mortgage Insurance?

Lenders Mortgage Insurance is a one-off premium charged when you borrow more than 80% of a property's value. The insurance protects the lender if you default on the loan and the property sells for less than what you owe. You pay the premium, but the policy covers the lender's risk, not yours.

The cost varies depending on your loan to value ratio and loan amount. Borrowing 85% of the property value costs less than borrowing 95%. The premium typically ranges from around 1% to 4% of the loan amount, though it can be higher at very high LVR levels. You can pay it upfront at settlement or add it to your loan amount, which means you'll also pay interest on that premium over the life of your loan.

Consider a general dentist buying their first home with a 10% deposit. At a 90% LVR, the LMI premium might be around $15,000 to $20,000 depending on the lender and loan amount. Capitalising that cost into the loan means paying interest on it for the next 25 or 30 years, which can add several thousand dollars to the total cost.

Who Pays for Lenders Mortgage Insurance?

You do. The borrower pays for LMI even though the policy protects the lender. It's a cost triggered by your deposit size, not by your income, profession, or credit history. If you're borrowing above 80% LVR with a standard loan product, the lender will require you to cover this premium before settlement.

Some buyers assume the lender pays because it's called Lenders Mortgage Insurance, but the name refers to who the policy protects, not who pays for it. The premium is either deducted from your settlement funds or added to your loan balance, and it's non-refundable. If you sell the property or refinance a year later, you don't get any of that premium back.

How Dentists Can Borrow Without Paying LMI

Several lenders offer no LMI loans for dentists based on your profession. These products allow you to borrow up to 90% or sometimes 95% of the property value without the LMI premium. The lender waives the insurance requirement because they view dentists as lower-risk borrowers due to stable income and strong employment prospects.

Eligibility usually requires you to be a registered dentist working in clinical practice, either as an employee or practice owner. Some lenders also extend the exemption to dental specialists. You'll still need to meet standard lending criteria around income, expenses, and credit history, but the profession itself removes the LMI cost at higher LVR levels.

In our experience, a dentist with a 10% deposit who qualifies for an LMI waiver can preserve $15,000 to $20,000 that would otherwise go toward the premium. That capital stays available for furniture, renovations, or maintaining a buffer in your offset account. The loan structure and interest rate remain the same as a standard home loan, you're simply not paying for insurance that doesn't protect you.

No LMI Loans vs Standard High LVR Loans

The core difference is the upfront cost. A standard high LVR loan at 90% includes an LMI premium capitalised into your loan balance. A professional no LMI loan at the same LVR doesn't include that premium, which reduces your loan amount and your ongoing repayments.

Interest rates on no LMI loans are typically the same as or very close to standard variable or fixed rates. Some lenders offer rate discounts for professional borrowers, though this varies by lender and loan product. The waiver doesn't mean the lender is taking on more risk for nothing. They're pricing in your profession and income stability rather than requiring you to insure them separately.

As an example, a dentist borrowing $450,000 at 90% LVR without LMI has a lower loan balance and lower monthly repayments than someone borrowing the same amount with a capitalised $18,000 LMI premium. Over time, that difference compounds. You're also starting with more equity in the property from day one, which can matter if you refinance or access equity down the track.

When a Family Guarantee Removes LMI Instead

A family guarantee allows a parent or close family member to use equity in their own property to support your deposit. The guarantor doesn't hand over cash. Instead, their property acts as additional security, which reduces your loan to value ratio in the lender's calculation and removes the need for LMI.

This option works well if you're early in your career and haven't yet built up savings for a larger deposit, but your parents have accessible equity. The guarantor's exposure is limited to the portion of your loan above 80% LVR, and you can usually release them from the guarantee once you've paid down enough of the loan or the property has increased in value.

We regularly see dentists combine a family guarantee with a professional loan package to borrow at 90% or 95% LVR without LMI and without needing to capitalise any premium. The guarantor's security covers the lender's risk, and your profession supports the loan structure. You end up with a lower loan balance and more flexibility to pay down the guarantee portion quickly if you choose.

Government Schemes That Waive LMI

The Home Guarantee Scheme includes programs like the First Home Guarantee, which allows eligible first home buyers to borrow up to 95% LVR without paying LMI. The government guarantees the portion of the loan above 80%, so the lender doesn't require you to take out separate insurance.

Eligibility depends on income caps, property price caps, and whether you're buying as a first home buyer or under a regional allocation. For dentists, these schemes can work if you meet the criteria, but many general dentists exceed the income thresholds or are buying in areas where property prices sit above the caps. If you don't qualify for a government scheme, a professional LMI waiver is often the more accessible option.

Both pathways result in the same outcome - you borrow above 80% LVR without paying an insurance premium. The route you take depends on your circumstances, location, and whether the property and your income align with scheme requirements.

Why the LVR Threshold Matters

Lenders set 80% loan to value ratio as the point where LMI applies because it represents a deposit of 20% plus enough to cover purchase costs. Below that threshold, the lender has a buffer if property values drop and they need to recover the loan balance through a sale. Above 80%, that buffer shrinks, so they either charge you for insurance or assess your profile to determine if the risk is acceptable without it.

For dentists, the professional waiver shifts that threshold to 90% or sometimes 95%. Your deposit requirement drops from 20% to 10% or 5%, and you're not covering an insurance cost to make up the difference. You still need to factor in stamp duty and settlement costs, but your savings requirement is lower and your capital is more flexible.

At 90% LVR with no LMI, you're borrowing more and holding less equity initially, but you're not paying interest on a capitalised premium. If property values increase, your equity position improves quickly. If values stay flat or drop slightly, you're in the same position as someone who paid LMI at that LVR, but you've held onto more cash along the way.

How LMI is Calculated by Lenders

Lenders use a sliding scale based on your LVR and loan amount. The premium increases as your deposit decreases. An 85% LVR loan attracts a lower premium than a 90% LVR loan, and a 95% LVR loan attracts the highest premium. The actual dollar figure also rises with the loan amount, so a larger loan at the same LVR costs more to insure than a smaller one.

The calculation is done by the lender's LMI provider, usually Genworth or QBE. Each insurer has slightly different pricing, and lenders may use one or both depending on the loan structure. You don't get to choose the insurer or negotiate the premium. The lender quotes the figure as part of your loan offer, and you either accept it, increase your deposit to avoid it, or switch to a loan product that waives it.

For dentists using a low deposit loan with an LMI waiver, this calculation doesn't apply. The lender approves the loan at 90% or 95% LVR without referring to an insurer, and the premium line item doesn't appear on your settlement statement.

Call one of our team or book an appointment at a time that works for you. We'll review your deposit, profession registration, and loan structure to confirm which lenders offer the most suitable no LMI option for your circumstances.

Frequently Asked Questions