Australia Mortgage Insurance for Immigrants – Australia

Buying a home in Australia is a dream for many immigrants looking to build a new life. However, with rising property prices, securing a mortgage often involves additional costs—including Lenders Mortgage Insurance (LMI). For newcomers, understanding how mortgage insurance works and its role in the home buying process is essential.

In this guide, we’ll break down the basics of mortgage insurance in Australia, who needs it, how much it costs, and how immigrants can navigate the system to become successful homeowners.

Understanding Mortgage Insurance in Australia

When purchasing a home in Australia, especially with a smaller deposit, you may be required to pay mortgage insurance. But what exactly is it?

What is Lenders Mortgage Insurance (LMI)?

Lenders Mortgage Insurance is a one-time premium paid by the borrower to protect the lender—not the borrower—in case the borrower defaults on the home loan.

Why Do Lenders Require LMI?

Australian lenders typically require LMI when a homebuyer borrows more than 80% of the property’s value—meaning they have a deposit of less than 20%.

Example:

• Property value: AUD 600,000
  
• 10% deposit: AUD 60,000
  
• Loan: AUD 540,000
  
• Since the deposit is below 20%, LMI is likely to be required.

Do Immigrants Need to Pay Mortgage Insurance?

Yes—immigrants are often required to pay LMI, especially if they have a small deposit or lack a credit history in Australia.

Who Is Considered a Foreign Borrower?

You may be seen as a non-resident or temporary resident if you:

• Hold a temporary visa (e.g. student or work visa)
  
• Recently received permanent residency
  
• Have little or no credit history in Australia

Common Scenarios Where Immigrants Pay LMI:

• Less than 20% deposit saved
  
• Employment history under 12 months in Australia
  
• No guarantor
  
• Self-employed or casual income

How Much Does Mortgage Insurance Cost in Australia?

LMI is calculated based on the loan amount and loan-to-value ratio (LVR). The higher the LVR, the more LMI you’ll need to pay.

Typical LMI Costs:

Property Value	Deposit	Loan Amount	Estimated LMI
AUD 500,000	10% (AUD 50k)	AUD 450,000	AUD 8,000–10,000
AUD 700,000	5% (AUD 35k)	AUD 665,000	AUD 18,000–20,000

Note: Costs vary depending on lender policies, your visa status, and loan terms.

Can LMI Be Added to the Loan?

Yes. Most lenders allow the LMI premium to be capitalized into the home loan, so you don’t need to pay it upfront. However, this increases your total loan amount and monthly repayments.

How to Reduce or Avoid LMI as an Immigrant

While mortgage insurance can be costly, there are strategies to reduce or even avoid it.

Save a Bigger Deposit

The simplest way to avoid LMI is to save at least 20% of the property value. This shows lenders that you’re a lower-risk borrower.

Tips to Save Faster:

• Open a high-interest savings account
  
• Use a first home buyer savings scheme
  
• Cut unnecessary expenses
  
• Consider buying a cheaper property in a regional area

Get a Guarantor Loan

If a family member (usually a citizen or permanent resident) can act as a guarantor, some lenders may waive LMI.

What a Guarantor Provides:

• Uses the equity in their property as security
  
• Does not need to give you money directly
  
• Reduces your LVR, helping you avoid LMI

Look for LMI-Free Promotions

Some lenders offer LMI waivers to eligible professions or under special home loan promotions.

Examples of Eligible Occupations:

• Doctors and medical specialists
  
• Accountants
  
• Lawyers
  
• Engineers
  
• IT professionals

Check with banks or mortgage brokers to see if your profession qualifies.

How to Apply for a Mortgage as an Immigrant

The mortgage application process for immigrants is similar to that of citizens, but with some additional considerations.

Step 1: Check Your Visa Eligibility

Some lenders require you to be a:

• Permanent resident
  
• Temporary resident with a specific visa (e.g. 482, 491, 189)
  
• Holder of a bridging visa with a PR pathway

Step 2: Prepare Financial Documents

You’ll need to provide:

• Passport and visa
  
• Proof of income (payslips or bank statements)
  
• Tax documents (if applicable)
  
• Employment contract
  
• Rental history or credit reports

Step 3: Get Pre-Approval

Pre-approval helps you:

• Know your borrowing power
  
• Estimate your LMI (if required)
  
• Make stronger offers when house hunting

Best Mortgage Lenders for Immigrants in Australia

Some banks are more flexible with non-resident and immigrant borrowers. It’s wise to compare lenders or consult a mortgage broker who specializes in foreign applicants.

Top Lenders for Immigrants:

• Commonwealth Bank (CBA)
  
• Westpac
  
• ANZ
  
• St. George Bank
  
• NAB

Tip: Some lenders may charge higher interest rates or LMI for temporary visa holders, so compare options carefully.

Government Support Programs for Immigrant Home Buyers

Although mortgage insurance is a private cost, there are government schemes to help reduce the burden of buying a home.

First Home Guarantee Scheme

Eligible first-home buyers can purchase a home with as little as 5% deposit without paying LMI. To qualify, you must:

• Be a permanent resident or citizen
  
• Have never owned a home in Australia
  
• Meet income and price thresholds

Regional First Home Buyer Guarantee

This scheme is ideal for immigrants living in regional areas. You can access a low-deposit home loan without LMI in designated postcodes.

First Home Super Saver Scheme

Allows you to save for a deposit using your superannuation account, reducing your taxable income and accelerating your savings.

Things to Consider Before Buying a Home in Australia

Before jumping into the housing market, it’s important to evaluate your financial situation and long-term goals.

Check Your Long-Term Visa Pathway

If you’re on a temporary visa, consider whether you’ll be applying for permanent residency. Some lenders limit lending based on visa type.

Factor in Additional Costs

Homeownership involves more than just deposits and mortgage insurance. Consider:

• Stamp duty (may be higher for foreigners)
  
• Legal and conveyancing fees
  
• Property inspection costs
  
• Council rates and insurance

Evaluate Local Market Conditions

Research the housing market in the area you wish to buy. Property values and rental yields vary across cities and regions.

Buying a home in Australia as an immigrant can be a rewarding but complex process—especially when mortgage insurance comes into play. While LMI may seem like an extra burden, it can also be the stepping stone to owning your first home with a smaller deposit.

By understanding how LMI works, comparing lenders, and exploring government-backed schemes, immigrants can confidently step into the Australian property market and invest in their future.