Add LMI to Your Home Loan? Find Relief Fast (2026)

Are you ready to take the plunge into the property market but concerned about the additional costs such as Lenders Mortgage Insurance (LMI)? You're not alone. Many aspiring homeowners find themselves asking whether they can add LMI to their home loan to ease the upfront financial burden. The good news is, you can, and understanding how this works could be the key to unlocking your homeownership dreams.

Understanding Lenders Mortgage Insurance (LMI)

Lenders Mortgage Insurance is a one-off insurance premium that protects lenders from financial loss if a borrower defaults on their home loan. This insurance is typically required when a borrower has a deposit of less than 20% of the property's purchase price. While LMI protects the lender, the cost is borne by the borrower, which can be a significant upfront expense.

Can I Add LMI to My Home Loan?

Yes, in most cases, you can add the cost of LMI to your home loan, a process known as capitalising LMI. This means you do not need to pay the full LMI premium upfront, easing the immediate financial pressure. Instead, the LMI premium is added to your loan amount and repaid over the life of the loan.

Here’s a snapshot of current market rates and options:

Loan Type	Interest Rate Range	Capitalising LMI
Standard Variable	6.49% - 7.25%	Available
Fixed Rate (1-5 years)	6.75% - 8.00%	Available
Interest Only	7.00% - 8.50%	Available

Typically, lenders allow borrowers to capitalise LMI for loans with a loan-to-value ratio (LVR) of up to 95%, meaning you could potentially borrow up to 95% of the property value including the cost of LMI.

Steps to Add LMI to Your Home Loan

Adding LMI to your home loan involves several steps:

1. Consult with a Mortgage Broker: At Esteb and Co, our experienced brokers can guide you through the process, leveraging our access to 83+ lenders to find the best option for your situation.
2. Determine Your LVR: Calculate your loan-to-value ratio to understand your eligibility for LMI capitalisation.
3. Get Pre-Approval: Secure pre-approval for your loan amount including LMI, giving you a clear budget when house hunting.
4. Finalise Your Loan Application: When you find a property, proceed with the full loan application, ensuring LMI is included in your borrowed amount.
5. Review Your Loan Agreement: Carefully review the terms, including how LMI affects your overall repayments.

Tips and Considerations

Here are some expert tips to consider when deciding whether to add LMI to your home loan:

• Evaluate Your Long-Term Costs: While capitalising LMI reduces upfront costs, it increases the total interest payable over the loan’s life. Calculate the long-term cost implications.
• Consider Increasing Your Deposit: If possible, consider increasing your deposit to 20% to avoid LMI altogether, saving you thousands in the long run.
• Understand Your Lender’s Policy: Each lender may have different policies regarding LMI capitalisation. Ensure you understand these differences, which our brokers at Esteb and Co can help clarify.
• Shop Around: Different lenders may offer more competitive rates and conditions for loans with capitalised LMI, so it pays to shop around.

Frequently Asked Questions

1. What is the average cost of LMI in Australia?

The cost of LMI varies based on the LVR and the loan amount. For a $500,000 loan with a 10% deposit, LMI could range from $8,000 to $12,000.

2. Can I avoid paying LMI?

If your deposit is 20% or more of the property's purchase price, you typically do not need to pay LMI. Some lenders offer LMI waivers for specific professional groups.

3. Does LMI affect my borrowing power?

Capitalising LMI slightly reduces your borrowing power as the LMI cost is included in your total loan amount. However, it allows you to purchase sooner with a smaller deposit.

4. Is LMI refundable?

LMI is non-refundable once paid, even if you pay off your loan early or refinance.

5. How does adding LMI to my loan affect my repayments?

Including LMI in your loan increases your monthly repayments slightly due to the larger principal amount. It's essential to assess your budget accordingly.

At Esteb and Co, we understand the intricacies of LMI and home loans. With access to over 83 lenders, we can tailor a solution that suits your financial situation and homeownership goals. Reach out today to explore your options.