The LMI Cliff: How to Spot It and Save Thousands

For many first-time buyers in Australia, Lenders Mortgage Insurance (LMI) is a necessary evil. It allows you to buy a property with less than a 20% deposit. But the way LMI is calculated can be surprising.

It's not a flat rate.

LMI is calculated on a sliding scale based on your Loan-to-Value Ratio (LVR). As your LVR increases, the risk to the lender increases, and the premium jumps—often dramatically.

Visualizing the Cliff

Imagine you're buying a $600,000 property.

• With a $60,000 deposit (10%), your LMI might be around $10,000.
• With a $90,000 deposit (15%), your LMI might drop to around $3,500.

That extra $30,000 in deposit saves you $6,500 in fees instantly. That's a guaranteed 21% return on your money!

Our Scenario Visualizer highlights these cliffs. On the heatmap, you'll see the color shift dramatically where LMI tiers change. These are the danger zones—and the opportunity zones.

Strategy Tip: Use the "Max Capital" slider on our tool to see how much your buying power expands as you approach the 20% deposit mark. Sometimes, borrowing money from family or selling an asset to bridge a small gap can save you thousands in sunk costs.