Lenders Mortgage Insurance: When It Makes Sense to Pay It

First home buyers in Canberra are being forced to consider lenders mortgage insurance (LMI) as a necessary evil, with many borrowing more than 80% of the purchase price.

This matters now because the current low vacancy rate in Canberra, at around 0.8%, is driving up prices and making it harder for first timers to save for a deposit. With the ACT government's Home Buyer Concession Scheme and the federal government's First Home Guarantee scheme providing some relief, buyers still need to navigate the complexities of LMI.

In areas like Gungahlin and Belconnen, which are experiencing significant growth, first home buyers can access programs like the ACT government's Home Buyer Concession Scheme, which provides a duty concession for eligible buyers. The Home Buyer Concession Scheme, available through organisations like the ACT Revenue Office and the Housing Industry Association, can help reduce the upfront costs of buying a home in suburbs like Ngunnawal, where the median house price is around $740,000, and Franklin, where it's around $820,000.

According to data from the Australian Bureau of Statistics, the number of first home buyers in the ACT has decreased by 10% over the past year, with 237 loans approved in May 2026, compared to 263 in May 2025. Meanwhile, the median house price in Canberra has increased by 5% over the same period, to $835,000. With LMI premiums ranging from 1.5% to 4% of the loan amount, depending on the loan-to-value ratio and the lender, first home buyers need to carefully consider the costs. For example, on a $700,000 loan with a 10% deposit, the LMI premium could be around $7,000.

Understanding the Costs

So when does it make sense to pay LMI? If a first home buyer can only scrape together a 5% deposit, they may need to pay LMI, but if they can wait and save for a 20% deposit, they can avoid the premium. However, with prices rising rapidly in areas like Dickson and Downer, where the median house price is over $900,000, some buyers may need to act quickly to secure a property. In these cases, paying LMI might be a necessary step to get into the market.

In practical terms, first home buyers in Canberra should shop around for lenders and compare LMI premiums, as well as consider using a mortgage broker to help navigate the process. With the right advice and planning, first home buyers can make an informed decision about whether to pay LMI and get into their dream home sooner. The ACT government's website provides a range of resources and information for first home buyers, including details on the Home Buyer Concession Scheme and other programs, while organisations like the Real Estate Institute of the ACT and the Canberra Home Buyers Centre offer guidance and support.