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LVR is calculated on the lower of purchase price and bank valuation. LMI is priced in bands - and capitalising the premium can push you into a higher band.
Lenders use the lower of purchase price and valuation as the security value.
Check these inputs before relying on the result
Important
These results are estimates for general informational purposes only. They are not a loan approval, a formal quote, or an offer of credit, and they are subject to individual lender assessment, verification of your income, expenses and credit history, and current lender policy. This is not personal financial or credit advice and does not take your objectives or circumstances into account.
Interest rates and comparison rates vary by lender, loan purpose, LVR and your individual circumstances, and can change at any time. Any rate used here is the figure you entered, not a rate offer.
LMI premiums shown are indicative estimates based on placeholder banded rates. Real premiums are set by the insurer (Helia, QBE or a lender-specific schedule) and vary by loan size, LVR, loan purpose, employment type and any first home buyer or professional waiver. Verify against a live insurer calculator before relying on the figure.
Loan to value ratio is the loan amount divided by the lender's valuation of the property, expressed as a percentage. A $640,000 loan on an $800,000 valuation is an 80.00% LVR.
Lenders price and assess by LVR band. Below 60% and below 80% usually attract the sharpest rates; above 80% you enter mortgage insurance territory and policy tightens quickly.
Lenders mortgage insurance protects the lender, not you, if the property is sold at a loss after default. It is a one-off premium priced in bands by both LVR and loan size, rising steeply above 90%.
Premiums can move from roughly 1% of the loan at 85% LVR to 3-4% or more at 95%. On a $600,000 loan that is the difference between about $6,000 and over $20,000.
Most lenders let you add the premium to the loan rather than pay it in cash. That increases the loan, which increases the LVR, which can push you into a higher premium band - so the figure must be recalculated on the capitalised balance.
Lenders cap the capitalised LVR, commonly at 95% or 97% including the premium, and your borrowing capacity must still cover the larger loan.
A family guarantee over part of a parent's property can take an effective LVR back under 80% and remove the premium entirely. Government guarantee schemes can do the same for eligible buyers.
Some lenders waive LMI for selected professions - medical, legal, accounting and other groups - at up to 90% or even 95% LVR. Others offer a reduced flat fee product. Which one applies depends entirely on lender policy.
A $700,000 purchase with a $70,000 deposit, buying as an owner-occupier over 30 years.
The premium adds roughly $80 a month over 30 years - often far less than another year of saving while prices move.
The same $700,000 purchase with a limited guarantee of $70,000 secured against a parent's home.
A limited guarantee removed the premium completely, and the guarantee can be released once the loan falls below 80% of the property's own value.
It is a real cost, but it buys time in the market. If the premium is $13,000 and the property you want rises 5% in the year you would have spent saving, waiting costs more.
Some insurers offer a partial refund if the loan is discharged within the first one to two years, but the amount is small and many lenders no longer offer it. Do not assume a refund.
No. A new loan with a new lender above 80% LVR generally means a new premium. That is a key reason to check your current LVR before refinancing.
The lender uses the lower of the contract price and its own valuation. If a valuation comes in short, your LVR rises and you may need more deposit or a different lender.
Yes. Several lenders waive LMI to 90% (and in some cases 95%) for defined professions with qualifying income. Eligibility lists and income thresholds differ by lender and change regularly.
Every lender reads these numbers differently. Book a free 30-minute call and we'll check your figures against real lender policy.
A free, no-obligation 30-minute call is usually enough to know exactly where you stand and what to do next.
