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According to the Australian Prudential Regulation Authority’s first-quarter 2026 data, about 38% of new home loans nationwide currently have deposits below 20%, which means more than a third of new borrowers must pay Lenders Mortgage Insurance (LMI). At the same time, the Australian Securities and Investments Commission’s 2025 annual report notes that LMI premiums as a share of total loan amounts rose from an average of 1.8% in 2023 to 2.4% in 2026, reflecting the twin pressures of rising house prices and higher loan-to-value ratios (LVR). For buyers with a deposit below 20%, LMI is not an option but a mandatory cost — yet lenders differ significantly in how they calculate LMI, in their exemption policies and in their refund mechanisms, and a poor choice can mean thousands of dollars in extra outlay. Based on the latest 2026 policies and industry data, this article systematically compares the LMI rules of the mainstream lenders to help readers make a better-informed decision before applying for a home loan.

What LMI Really Is and the State of the Market in 2026

LMI is essentially insurance that protects the lender, not the borrower. When a borrower defaults and the proceeds from selling the property are not enough to cover the outstanding loan balance, the LMI insurer pays the lender the shortfall. Although the borrower pays the premium, the borrower is not the beneficiary. In 2026, LMI premium rates at the big four banks and major non-bank lenders show a clear tiered pattern: at an LVR between 80% and 85%, premiums are about 0.8%–1.2% of the loan amount; once the LVR exceeds 85%, premiums jump to 2.0%–3.5%; at an LVR of 95%, some institutions charge premiums above 4.0% of the loan amount.

The core variables in premium calculation are the loan amount, the LVR and the property type. For example, on a $500,000 loan at an LVR of 90%, ANZ’s LMI premium is around $12,500, while Westpac’s can reach $14,000. Premiums for owner-occupiers are usually lower than for investment properties, and the way premiums are calculated on fixed-rate products may also differ from variable-rate products. Notably, in 2026 about 15% of lenders offer the option to pay LMI premiums in instalments rather than as a lump sum, which reduces upfront cash pressure but may add 5%–8% to the total cost.

Side-by-Side Comparison of the Big Four Banks’ LMI Policies

Commonwealth Bank (CBA) uses Genworth as its LMI underwriter. Its 2026 standard rate table shows premiums of 1.0% of the loan amount at an LVR of 85%, rising to 2.2% at 90% and 3.8% at 95%. CBA allows certain professions (such as doctors and lawyers) to apply for an LMI waiver when the LVR does not exceed 90%, but applicants must provide proof of profession and at least 12 months of practice.

Westpac uses QBE LMI. Its rates are close to CBA’s but differ slightly: 1.1% at an LVR of 85%, 2.3% at 90% and 3.9% at 95%. Westpac’s LMI refund policy is relatively generous — if the borrower makes extra repayments within the first two years that bring the LVR below 80%, they can apply for a pro-rata refund of the premium, up to a maximum of 40% of the premium paid.

NAB uses its own in-house LMI calculation model, with rates slightly below its peers: 0.9% at an LVR of 85%, 2.0% at 90% and 3.5% at 95%. NAB has also introduced an LMI discount program: for first home buyers with a loan amount below $700,000, the premium can be reduced by 15%.

ANZ also uses QBE, with rates close to Westpac’s, but ANZ’s LMI waiver covers a narrower range — it is open only to medical professionals and requires an LVR of no more than 85%. ANZ does not offer the option to pay premiums in instalments.

Differentiated Strategies at Non-Bank and Specialist Lenders

Non-bank institutions show greater flexibility in the LMI space. For example, ING launched an LMI premium refund program in 2026: borrowers who keep up their repayments on time for the first 36 months can receive a refund of 25% of the premium. This mechanism has not yet appeared at the big four banks.

Bank of Queensland (BOQ) offers LMI premium reductions of 10%–15% to borrowers with an LVR in the 80%–85% range, provided they also open a BOQ salary account and set up automatic repayments. This kind of cross-selling strategy became common in 2026.

Specialist lenders such as Teachers Mutual Bank and Police Bank offer concessions to specific occupational groups. Teachers Mutual Bank allows teachers to apply for an LMI waiver at an LVR of up to 90%, while Police Bank offers premium discounts to police officers and emergency services workers. These occupation-specific concessions are usually not advertised, and borrowers need to ask about them proactively.

LMI waivers are not out of reach. In 2026, about 8% of new home loans received a partial or full LMI waiver, up from 5% in 2024. The main waiver conditions include:

  • Occupational waivers: Professional groups such as doctors, lawyers, accountants and engineers may qualify for a waiver when the LVR does not exceed 90%. Different institutions define eligible occupations differently — Westpac, for example, includes registered nurses, while CBA limits its waiver to specialist doctors.

  • High-net-worth borrowers: Some institutions offer LMI waivers to borrowers with deposits or investment assets above $500,000. In 2026, NAB raised this threshold to $750,000, while also requiring the loan amount not to exceed $1.5 million.

  • First home buyer programs: The federal government’s First Home Guarantee allows eligible borrowers to buy a home with a deposit of just 5% without paying LMI. The scheme’s quota for 2026 is 35,000 places, down from 50,000 in 2025, making competition keener.

  • Builder/developer concessions: Some construction loan programs offer LMI waivers, provided the borrower is buying off-the-plan or a newly built home. In 2026, these waivers are mostly offered in partnership with developers rather than as standard bank products.

Can LMI Premiums Be Refunded or Transferred?

LMI refund policies vary by institution. Most institutions allow borrowers who repay their loan in full within the first 12 months to apply for a partial premium refund, but usually deduct a 20%–30% administration fee. In 2026, both QBE and Genworth adjusted their refund policies: QBE requires refund applications within the first two years, and the LVR must have fallen below 80%; Genworth allows applications within the first three years, with the refund proportion declining over time.

LMI portability (keeping the same LMI when moving from an old loan to a new one) is not common in 2026. A few non-bank lenders allow borrowers to keep their existing LMI when refinancing, provided the new loan’s LVR does not exceed the original loan’s LVR. In practice, the big four banks almost never accept LMI portability, so borrowers refinancing may have to pay LMI again. According to Canstar’s 2026 report, about 60% of refinancing applications require borrowers to pay LMI again, with an average added cost of $8,000–$12,000.

How to Reduce LMI Costs: Strategies and Case Studies

Borrowers can reduce their LMI costs through the following strategies:

  • Raise the deposit to above 15%: Dropping the LVR from 95% to 90% can cut the premium by about 40%. For example, on a $600,000 loan, the premium is about $22,800 at an LVR of 95% but falls to $13,200 at 90% — a saving of $9,600.

  • Choose instalment payment of LMI premiums: Some institutions allow the premium to be spread across monthly repayments, easing upfront cash pressure. On a premium of $8,000, for example, paying over 36 months costs only about $230 a month.

  • Use a guarantor: A parent acting as guarantor can help bring the LVR below 80%, avoiding LMI altogether. In 2026, about 12% of new home loans used a guarantor structure.

  • Compare LMI rates across institutions: At the same LVR, premiums can differ by more than 30% between institutions. For example, at an LVR of 90%, NAB’s premium is 2.0% of the loan amount while ANZ’s is 2.3% — a difference of $1,500 on a $500,000 loan.

Real-world case: Alice, a first home buyer in Sydney, applied for a $650,000 loan to buy an apartment in March 2026 with a 10% deposit (LVR 90%). She compared CBA (premium $14,300) with NAB (premium $13,000) and saved $1,300 by choosing NAB. At the same time, she obtained a 0.15% rate discount by opening a NAB salary account, further reducing her long-term costs.

FAQ

Q1: Is the LMI premium a fixed percentage of the loan amount? A1: No. LMI premiums are calculated on a tiered basis according to the LVR and the loan amount. In 2026, premiums are about 0.8%–1.2% at an LVR of 80%–85%, and can reach 3.5%–4.0% at an LVR of 95%. The larger the loan, the higher the absolute premium, but the percentage can vary by institution.

Q2: Can I get my LMI premium back if I pay off the loan early? A2: Yes, but there are time limits. QBE requires refund applications within the first two years, and Genworth allows applications within three years. Refund amounts decline over time and a 20%–30% administration fee is deducted. In 2026, some institutions have stopped offering refunds altogether.

Q3: Can LMI be transferred when I refinance? A3: Very few institutions allow it. The big four banks almost never accept LMI portability, so borrowers usually have to pay LMI again when refinancing. According to Canstar’s 2026 data, about 60% of refinancing applications require LMI to be paid again, at an average cost of $8,000–$12,000.

Q4: Can the First Home Guarantee exempt me from LMI? A4: Yes. Eligible first home buyers need only a 5% deposit and do not pay LMI. The scheme’s quota for 2026 is 35,000 places and applications must go through approved lenders. Remaining places are usually exhausted by the middle of the financial year, so apply early.

Q5: I’ve heard some occupations can get an LMI waiver — is that true? A5: Yes. Professional groups such as doctors, lawyers and accountants may qualify for a waiver when the LVR does not exceed 90%. The scope varies by institution — Westpac, for example, covers registered nurses, while CBA limits waivers to specialist doctors. Proof of profession and income records are required.

References

  1. Australian Prudential Regulation Authority (APRA). 2026. “Quarterly Authorised Deposit-taking Institution Property Exposures Report, Q1 2026.”
  2. Australian Securities and Investments Commission (ASIC). 2025. “Mortgage Insurance Practices and Consumer Outcomes Report, 2025.”
  3. Canstar. 2026. “Lenders Mortgage Insurance Analysis: Premiums, Refunds, and Exemptions, 2026 Edition.”
  4. Reserve Bank of Australia (RBA). 2026. “Financial Stability Review, April 2026.”
  5. Mortgage & Finance Association of Australia (MFAA). 2026. “Industry Benchmarking Report: LMI Trends and Borrower Profiles, 2026.”