Do you know what LMI is and who pays for it?

What is Lenders Mortgage Insurance?

Lenders Mortgage Insurance is a one-time premium charged when you borrow more than 80% of a property's value. The insurance protects the lender, not you, if the property is sold for less than what's owed on the loan.

Consider a registered nurse purchasing with a 10% deposit. The loan to value ratio sits at 90%, which triggers an LMI premium. Depending on the loan amount and deposit size, that premium might be $8,000 or more. The cost is either paid upfront at settlement or added to the loan amount, meaning you also pay interest on the insurance premium over the life of the loan.

The premium isn't fixed across lenders. Each lender uses a different insurer and risk model, so the same loan scenario can produce different LMI costs. This variation matters when you're comparing loan options, particularly if you're borrowing at 90% or 95% LVR.

Who Pays for LMI?

You pay for it as the borrower, even though the policy protects the lender. If the property is sold and the sale doesn't cover the outstanding loan, the insurer compensates the lender for the shortfall. You remain liable for any remaining debt.

This structure creates confusion. Many borrowers assume the insurance offers them protection or reduces their liability. It doesn't. The premium exists purely to reduce the lender's risk when lending at a high LVR, and the cost is passed directly to you.

In a scenario where a midwife borrows at 95% LVR, the LMI premium could exceed $15,000 on a modest loan. That amount is capitalised onto the loan, which increases both the debt and the ongoing interest cost. Over a 30-year loan term, the total cost of that premium can compound significantly.

How Nurses and Midwives Can Avoid LMI

Most lenders offer LMI waivers for nurses and midwives when borrowing up to 90% LVR, and some extend this to 95% LVR depending on your registration and employment status. The waiver isn't automatic. You need to apply through a lender that offers the professional exemption and meet the lender's specific criteria.

Eligibility typically requires current registration with AHPRA, ongoing employment in the nursing or midwifery field, and a clean credit history. Some lenders also cap the loan amount for waiver eligibility, while others restrict the waiver to owner-occupied purchases rather than investment properties.

A nurse practitioner purchasing their first home with a 10% deposit would normally face an LMI bill in the range of $10,000 or more. With a professional waiver, that cost disappears entirely. The loan structure remains the same, the interest rate is unchanged, but the upfront or capitalised premium is removed. That saving can be redirected toward furniture, renovations, or simply kept as a buffer in offset.

Does Waiving LMI Affect Your Interest Rate?

Waiving LMI doesn't increase your interest rate. The professional exemption is a separate policy decision by the lender and doesn't alter the rate you're offered based on your deposit and loan structure.

Some borrowers assume that avoiding LMI means accepting a higher rate to compensate the lender for the additional risk. That's not how the waiver works. The lender has assessed your profession as lower risk based on income stability and employment patterns, and the waiver reflects that assessment. Your rate is determined by the same factors as any other borrower: your deposit size, loan amount, whether the rate is fixed or variable, and the lender's current pricing.

In our experience, nurses and midwives who access no LMI loans often secure the same or lower rates than borrowers in other professions because lenders view the sector as stable and creditworthy. The waiver is an additional benefit, not a trade-off.

Can You Use a Family Guarantee Instead of Paying LMI?

A family guarantee allows a parent or close relative to use equity in their property as additional security, which can eliminate the need for LMI even without a professional waiver. This option works well if your profession doesn't qualify for a waiver or if you're borrowing above the waiver threshold.

The guarantor doesn't hand over cash. They provide a limited guarantee, usually covering the portion of the loan that exceeds 80% LVR. Once you've paid down the loan or the property has increased in value enough to bring the LVR below 80%, the guarantee can be removed and the guarantor's property is released from the loan.

A midwife purchasing with a 5% deposit might combine a family guarantee with the professional waiver. If the waiver covers borrowing up to 90% LVR, the family guarantee would only need to cover the gap between 90% and 95%, reducing the risk and exposure for the guarantor. This approach keeps LMI costs at zero while minimising the guarantor's liability.

What About Government Schemes That Waive LMI?

The Home Guarantee Scheme offers LMI waivers for eligible first home buyers and single parents, allowing purchases with a deposit as low as 5%. The scheme is separate from professional waivers and has its own eligibility criteria, including income caps and property price limits.

If you qualify for both a professional waiver and a government scheme, you'll need to choose one. The professional waiver often provides more flexibility around property price and loan amount, while the government scheme may allow a lower deposit. Each option suits different circumstances.

Nurses and midwives purchasing in regional areas sometimes find the government scheme more restrictive due to price caps, while those in metro areas may exceed the income threshold. The professional waiver doesn't have these limits, making it the more practical option for many in the sector.

How Much Can You Save by Avoiding LMI?

The saving depends on your loan amount and deposit. At 90% LVR, the LMI premium might range from $5,000 to $12,000. At 95% LVR, that figure can climb to $20,000 or more. Avoiding that cost means you're borrowing less, paying less interest, and keeping more equity in the property from day one.

For a registered nurse refinancing an existing loan, waiving LMI on a new loan can make the switch worthwhile even if the rate difference is modest. If you're currently paying LMI on a loan and you refinance to a lender offering a professional waiver, you won't get the original premium refunded, but you'll avoid paying it again if your LVR is still above 80%.

The compounding effect of avoiding LMI is often underestimated. A $10,000 premium added to your loan doesn't just cost $10,000. Over 30 years, you'll also pay interest on that amount. At current variable rates, that could add several thousand dollars to the total cost of the loan.

What If You're Buying an Investment Property?

Most professional LMI waivers apply only to owner-occupied properties. If you're purchasing an investment property with a 10% deposit, you'll likely need to pay LMI unless you use a family guarantee or wait until you've saved a 20% deposit.

Some lenders do extend the waiver to investment purchases for nurses and midwives, but the criteria are stricter and the LVR threshold is usually lower. It's worth exploring your options with a broker who understands the specific policies across different lenders, particularly if you're looking to build a portfolio while still working in the sector.

Call one of our team or book an appointment at a time that works for you. We'll walk through your deposit, your registration status, and the lenders that offer waivers for your situation, so you know exactly what you're eligible for before you start your property search.

Frequently Asked Questions