How Much Deposit Do You Need to Avoid LMI?

The short answer

To avoid Lenders Mortgage Insurance (LMI) in Australia, you generally need a deposit of at least 20% of the property price, which puts your loan-to-value ratio (LVR) at 80% or below. On a $750,000 home that's a $150,000 deposit. The main exception is government schemes such as the First Home Guarantee (the "5% Deposit Scheme"), where an eligible buyer can avoid LMI with as little as a 5% deposit because the government acts as guarantor.

How LMI and the 20% threshold work

LMI is a one-off insurance premium that protects the lender (not you) if you default and the property sells for less than the loan balance. Lenders typically require it when your LVR is above 80%: that is, when you borrow more than 80% of the property's value. According to Moneysmart, a 20% deposit means your LVR is below 80%, so LMI usually doesn't apply.

LVR is calculated as:

LVR = loan amount ÷ property value × 100

So the deposit size that avoids LMI depends entirely on the property price:

Property price	20% deposit (no LMI)	Loan at 80% LVR
$500,000	$100,000	$400,000
$750,000	$150,000	$600,000
$1,000,000	$200,000	$800,000

A few important points:

• Stamp duty and other upfront costs sit on top of your deposit. Your 20% deposit only governs the LVR; you still need cash for stamp duty, conveyancing and registration fees.
• LMI rises sharply as your deposit shrinks. The premium is not a flat fee; it grows with both loan size and LVR band, so a 5% deposit costs far more in LMI than a 10% deposit.
• You can capitalise LMI (add it to the loan) instead of paying it at settlement, but you then pay interest on it for the life of the loan.

Worked example

Say you're buying a $750,000 home.

• A 20% deposit = $150,000, leaving a $600,000 loan at exactly 80% LVR. At 80% or below, the LMI estimate is $0.
• Drop to a 10% deposit = $75,000, and you borrow $675,000 at 90% LVR. At roughly 1.79% in the 90% band, LMI on a loan this size is in the order of $12,000, paid at settlement or capitalised onto the loan.

For comparison, on a $600,000 loan at 90% LVR the LMI estimate is about $10,740 (~1.79%), and $0 once you're at 80% LVR or below. So the difference between a 10% and a 20% deposit on the $750,000 purchase is roughly $75,000 more cash up front. In return it removes a five-figure LMI premium and reduces the interest you pay over the life of the loan.

To put the loan repayment in context, a $600,000 loan at 6% over 30 years (monthly P&I) costs around $3,597/month.

Model this in True Loan

You can test the exact deposit/LVR trade-off for your own numbers in the free True Loan calculator:

1. Enter the property price and your deposit, and True Loan computes your LVR and the resulting LMI estimate automatically (it's $0 at ≤80% LVR).
2. Check the upfront costs panel: it adds stamp/transfer duty (with first-home-buyer concessions for all 8 states/territories), conveyancing and registration fees, so you can see the total funds required at settlement, not just the deposit.
3. Use the side-by-side comparison tool to put a 20% deposit (no LMI) scenario next to a 10% deposit (LMI capitalised) scenario and compare total cost over the life of the loan.

If you're weighing whether to throw spare cash at the loan instead, note True Loan keeps these separate: use the Extra repayment ($/month) input for ongoing extra payments, and the dedicated Offset balance input to model a sustained offset account. Every scenario is shareable via its URL.

Common questions and mistakes

Does a 20% deposit guarantee no LMI? Almost always, yes. Lenders set their own policies, though, and some property types (e.g. small apartments) can attract LMI even below 80% LVR.

Can I avoid LMI with less than 20%? Yes, via the First Home Guarantee (5% deposit, government as guarantor; from 1 October 2025 there are no income caps and higher price caps, e.g. up to $1.5m in Sydney), a guarantor loan, or some profession-specific lender waivers.

Does the deposit have to be all my own savings? Not necessarily. You can boost it with the First Home Super Saver Scheme (up to a $50,000 lifetime voluntary-contribution limit, $15,000 per year), gifts, or first-home grants, though lenders may want to see "genuine savings".

Is LMI the same as mortgage protection insurance? No. LMI protects the lender; it does not cover your repayments if you lose your income. For the mechanics of the premium, see How is LMI calculated for a $600k loan at 10% deposit?.

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Figures here are estimates for the 2025-26 financial year and depend on your property price, lender and state. Always check official sources (your state revenue office, the ATO, Moneysmart and Housing Australia) and confirm with your lender. This is general information, not financial or credit advice.