Transforming Home Buying with LMI Concessions in Australia
Home buyers in Australia, especially those with a deposit of less than 20%, have long faced the added cost of Lenders Mortgage Insurance (LMI). Fortunately, from 2025 onward, new government-backed schemes and policy updates offer ways to reduce—or even eliminate—this expense.
Government Initiatives Easing LMI Costs
Home Guarantee Scheme (HGS): This multi-part scheme, which includes the First Home Guarantee, Family Home Guarantee, and Regional First Home Buyer Guarantee, allows eligible buyers to secure a home with just a 5% deposit. With a government guarantee covering up to 15% of the property’s value, qualifying buyers can avoid paying LMI entirely.
Guarantor Loans: If you have a family member willing to act as a guarantor by offering equity from their property, you may bypass LMI requirements even when you have a low deposit.
Innovative Discounts and Reform Proposals
Green LMI Discount: Insurers like QBE, in partnership with NAB and Bank Australia, are now providing a 5% discount on LMI for buyers of energy-efficient homes. This initiative rewards eco-friendly property investments and helps lower the overall cost.
Proposed Reforms: Recent proposals from the Coalition seek to enhance the competitive nature of LMI-backed loans. If these reforms are enacted, further reductions or an expansion in LMI concession eligibility may be available to more buyers.
How Investors Benefit from LMI
For property investors, LMI is more than just an upfront cost—it’s also a deductible expense. LMI can be claimed as a borrowing expense over five years (or the term of the loan, whichever is shorter), and if the property is sold early, any unclaimed deduction can be taken in the sale year.
Summary of LMI Concession Options
| Concession Type | Who Qualifies | How It Works |
|---|---|---|
| Home Guarantee Scheme | First home buyers, families | 5% deposit with no LMI due to government backing |
| Guarantor Loans | Buyers with supportive family guarantees | LMI waived with the use of a property guarantee |
| Green LMI Discount | Buyers investing in energy-efficient properties | 5% discount on LMI fees |
| LMI Tax Deduction | Property investors | Deductible expense over a period of up to 5 years |
Final Thoughts
Make sure to keep all your documentation and verify your eligibility with your lender. While these LMI concessions can result in significant savings, it's important to note that they come with specific conditions.
Thinking about how to make the most of these opportunities? Chat with us today to discuss your investment strategy and see which options best suit your needs.
