LMI often gets a bad rap, but in many cases — especially in a tight and competitive housing market — it can be a smart strategic move.
What Exactly Is LMI?
LMI protects the lender (not you) if you default. It generally applies when your deposit is below 20%. While the idea of paying for someone else’s insurance can feel counter-intuitive, it’s often the “price of entry” into strong markets.
Why LMI Isn’t Always the Enemy
The key question is: Will waiting cost you more than the LMI premium?
Case Study: James and Tessa — Entering the Market Before Prices Moved Again
James (33) and Tessa (31) had their eyes on a $900,000 home. At their current savings rate, they were 12–18 months away from a 20% deposit.
- They secured the home before Christmas.
- Canberra prices nudged up again within months, adding roughly $20,000 to their property’s value.
- The growth more than offset the LMI they paid.
How LMI Can Help You Buy Sooner?
- You avoid price growth eating into your deposit.
- You start building equity instead of renting.
- You become a homeowner sooner, not later.
When LMI Isn’t Worth It
- You’re only weeks or a few months away from 20%
- Prices are flat or declining
- Stretching your borrowing capacity creates cash flow pressure
Case Study: Sam — When Waiting Made Financial Sense
Sam (28) was looking at an apartment. The local unit market was steady, and he needed just $4,000 more to reach a full 20% deposit.
Because the market wasn’t moving dramatically, waiting three months saved him thousands.
Is LMI a Friend or a Foe?
It's neither — it's a tool.
For many buyers, particularly during the pre-Christmas settlement rush, LMI can shorten the journey to homeownership and reduce long-term costs.
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