Compute Your Lenders Mortgage Insurance (LMI) at 90% LVR
1. What Are LMI and LVR?
Lenders Mortgage Insurance (LMI) is a premium charged by lenders when your Loan-to-Value Ratio (LVR) exceeds 80%. It protects the lender if you default.
LVR is the ratio of your loan amount to the property’s value, expressed as a percentage. At 90% LVR, the lender finances 90% of the property’s purchase price or valuation.
2. Identify Your Key Figures
- Property Value: The purchase price or latest valuation.
- Loan Amount: 90% of the property value.
- LMI Rate: Varies by lender and borrower profile, typically between 0.5% and 4% of the loan.
3. Example Calculation
Suppose you’re buying a home worth $600,000 and borrow 90% of its value:
- Loan Amount: $600,000 × 0.9 = $540,000
- Estimated LMI Rate: 1.8%
- Premium: $540,000 × 0.018 = $9,720
You can either pay this premium upfront or add it to your loan balance (“capitalise” it).
4. Factors That Influence LMI
- Higher LVR and larger loan amounts increase the premium.
- Investment loans, lower credit scores or smaller deposits may push rates up.
- Some first-home buyer programs waive LMI entirely for eligible borrowers.
5. Tax Treatment of LMI
- Owner-occupiers: LMI is not tax-deductible.
- Property investors: You can claim LMI as a tax deduction over five years.
Final Tip
For the most accurate LMI figure, try an online LMI calculator or consult a mortgage broker. Comparing different lenders can uncover lower LMI rates or smaller deposit requirements.
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Need help with your LMI calculation? Talk to our mortgage experts and optimise your borrowing strategy today.
