Key Takeaways
- The size of an LMI saving depends on the loan amount and the deposit: the smaller the deposit and larger the loan, the higher the premium that gets waived.
- On a higher-LVR loan around the $1 million mark, the premium waived could exceed $20,000, and it rises further at 95% and at higher price points.
- The real benefit is often larger than the premium alone, because borrowers also avoid paying interest on a capitalised premium and can enter the market sooner.
- The waiver removes a cost but not the assessment: the loan is still assessed at the actual rate plus 3 percentage points, and a smaller deposit means higher leverage.
Lenders Mortgage Insurance is one of the largest upfront costs of buying with a smaller deposit, and for accountants who can have it waived, the saving is often the single biggest financial advantage of their profession’s lending policies. With variable rates around the 6% mark and prices holding firm, knowing how much you could actually save, and why the figure is often larger than it first appears, helps you weigh the waiver properly rather than treating it as a vague perk. The honest answer is that it depends on a few specific factors, which are worth setting out clearly.
Estimating the saving for your own purchase, and confirming the waiver applies, is something a specialist mortgage broker for accountants can do precisely once your numbers are known. This article explains what determines the size of the saving, the three ways the waiver puts money back in your pocket, some illustrative scenarios, and what the saving does not change.
What Determines How Much You Save
Before looking at figures, it helps to understand what the premium responds to, because the saving is simply the premium you would otherwise have paid. Two factors drive it most.
Lenders Mortgage Insurance (LMI) is charged when you borrow more than 80% of a property’s value, and the premium scales with both your loan-to-value ratio (LVR) and the size of the loan. The smaller your deposit, the higher your LVR, and the steeper the premium, with the cost rising sharply as you move from 85% to 90% and again to 95%. A larger loan amount lifts it further. Because the waiver removes this premium entirely, the saving is largest exactly where the premium would have been largest: a high loan amount combined with a small deposit.
The Three Ways the Waiver Saves You Money
The headline saving is the premium itself, but it is not the only way the waiver helps. Seeing all three makes the true value clearer.
The Premium Itself
The most direct saving is the premium you avoid paying, which is a one-off cost normally due at settlement. On a higher-LVR loan this can be a substantial sum, and the waiver removes it in full rather than reducing it.
Interest Avoided on a Capitalised Premium
Many borrowers who pay LMI add it to the loan rather than paying it in cash, which is known as capitalising the premium. Doing so means paying interest on that amount for the life of the loan, so a premium of, say, $20,000 capitalised over a long loan term at current rates costs considerably more than $20,000 by the time it is repaid. The waiver removes that compounding cost as well as the premium.
The Opportunity of Buying Sooner
Because the waiver lets you buy with a smaller deposit, it can bring your purchase forward by a year or more compared with saving a full 20%. In a rising market, buying sooner can be worth as much as the premium itself, and it keeps your savings available for other purposes rather than tied up in a larger deposit.
Illustrative Savings Scenarios
Exact premiums are set by the lender’s mortgage insurer at the time of application and vary with the lender, the insurer, and your circumstances, so the figures below are rough illustrations rather than quotes. They show the pattern rather than a precise cost.
- On a property around the $1 million mark bought at 90% (a 10% deposit), the premium waived could exceed $20,000.
- At 95% (a 5% deposit) on a similar property, the premium would typically be higher again, as the cost rises steeply with LVR.
- At higher price points, the premium climbs further, since it scales with the loan amount as well as the LVR.
The consistent point across these is that the saving grows with both the loan size and the deposit gap, so the borrowers who benefit most are those buying higher-value property with a smaller deposit.
What the Saving Doesn’t Change
It would be misleading to present the waiver as pure upside, so it is worth being clear about what it does not alter. The saving is real, but it sits alongside some unchanged realities.
The waiver removes the premium; it does not relax the lender’s assessment. Your ability to service the loan is still tested at the actual rate plus a buffer of 3 percentage points set by the Australian Prudential Regulation Authority (APRA), which at current rates means being assessed at roughly 9%. Using the waiver to buy with a smaller deposit also means borrowing more, so your loan balance, repayments, and total interest are higher, and your equity buffer is thinner. For most accountants the saving clearly justifies the waiver, but it should be weighed as part of the whole picture rather than in isolation.
Frequently Asked Questions (FAQs)
How much can an accountant save with an LMI waiver?
It depends on the loan amount and deposit, but on a higher-LVR loan around the $1 million mark the premium waived could exceed $20,000, and it rises further at 95% or on higher-value property. The saving is the premium you would otherwise have paid, so it grows with both the loan size and how small your deposit is.
Why does the saving get bigger with a smaller deposit?
Because LMI scales with your LVR, the premium rises steeply as your deposit shrinks and your loan grows. Moving from a 10% to a 5% deposit increases the premium notably, so the waiver saves more at higher LVRs. A larger loan amount lifts the figure further again.
Is the saving just the premium, or is it more?
It is often more. Beyond the premium itself, borrowers who would have capitalised the cost into their loan also avoid paying interest on it over the loan term, and the ability to buy sooner has its own value in a rising market. Together these can make the real benefit larger than the premium alone.
Does avoiding LMI reduce my repayments?
Indirectly, if you would otherwise have capitalised the premium. Adding LMI to the loan increases the balance you pay interest on, so avoiding it keeps your loan smaller and your repayments lower than they would have been with the premium added. The waiver does not change the interest rate itself.
Can the saving be used as part of my deposit?
Not directly, since the waiver removes a cost rather than providing funds. What it does is let you proceed without setting aside money for the premium, which effectively frees up that amount for your deposit, costs, or other purposes compared with a borrower who has to pay it.
Is the saving worth borrowing with a smaller deposit?
Often, but not automatically. The saving is genuine, yet buying with a smaller deposit means a larger loan, higher repayments, and a thinner equity buffer, and the loan is still assessed at the actual rate plus 3 percentage points. Whether the saving justifies the higher borrowing depends on your circumstances.
The Bottom Line
The amount an accountant saves with an LMI waiver depends mainly on the loan size and the deposit, with the premium waived rising steeply as the deposit shrinks and the loan grows; on a higher-LVR loan around the $1 million mark it could exceed $20,000, and more at 95% or on higher-value property. The real benefit is often larger still, because the waiver also removes the interest you would have paid on a capitalised premium and lets you buy sooner. It does not change the lender’s assessment or the higher leverage that comes with a smaller deposit, so the soundest approach is to treat the saving as one significant factor in a fully considered decision.