What is LMI and why it matters for buyers

Lenders’ mortgage insurance, or LMI, is an added cost borrowers have to pay if they use a deposit of less than 20 per cent. Canstar executive Steve Mickenbecker said buyers needed to remember it was an insurance for the lender, not the borrower. “One of the biggest mistakes people make when using a smaller deposit is thinking the insurance will protect them. It doesn’t. It’s for the lender to cover the risk they take,” he said. “You don’t get any relief if you don’t make your repayments.” LMI is normally a one-off, non-refundable premium that is added to the loan. It is calculated based on the size of the deposit. The bigger the deposit, the lower the LMI premium.