When you borrow money from a bank they are taking a bet on your ability to service repayments on a mortgage. Typically when borrowing more than 80% (LVR) of a properties worth, the banks would consider this a riskier bet. As such banks will take out insurance called Lenders Mortgage Insurance (LMI) to minimise any loses they may experience in the event you are unable to make repayments. It's important however to note, this doesn't protect you as a borrower from being unable to to meet repayments.

The cost of LMI when taking out a loan could be a substantial amount, especially if you are trying to break into the housing market but the good news is there may be some strategies you can leverage to reduce this burden.

• Guarantor: if you have a family member who owns their own property then the banks can use this as collateral in the event you are unable to make a repayment.
• Bank incentives: Some banks will offer people who work in certain professions like medicine/healthcare a higher Loan Value Ratio (LVR) as they believe the risk of you being able to make a repayment is reduced
• Government programs: currently at the time of writing, the federal government has an incentive for first home buyers whereby if you meet the requirements that govern the program then the government will be your guarantor up to a Loan Value Ratio (LVR) of 95%. You can find our more here First Home Guarantee | Housing Australia

The following is an example table of how a bank may calculate their LMI however it's important to note that each bank calculates these values differently and they often don't share these values but we supply this table that we sourced elsewhere for illustrative purposes.

LVR	Up to $300K	$300,001 – $500K	$500,001 – $600K	$600,001 – $750K	$750,001 – $1M
80.01 – 81%	0.475%	0.568%	0.904%	0.904%	0.913%
81.01 – 82%	0.485%	0.568%	0.904%	0.904%	0.913%
82.01 – 83%	0.596%	0.699%	0.932%	1.090%	1.109%
83.01 – 84%	0.662%	0.829%	0.960%	1.090%	1.146%
84.01 – 85%	0.727%	0.969%	1.165%	1.333%	1.407%
85.01 – 86%	0.876%	1.081%	1.258%	1.407%	1.463%
86.01 – 87%	0.932%	1.146%	1.407%	1.631%	1.733%
87.01 – 88%	1.062%	1.305%	1.463%	1.631%	1.752%
88.01 – 89%	1.295%	1.621%	1.948%	2.218%	2.395%
89.01 – 90%	1.463%	1.873%	2.180%	2.367%	2.516%
90.01 – 91%	2.013%	2.618%	3.513%	3.783%	3.820%
91.01 – 92%	2.013%	2.674%	3.569%	3.867%	3.932%
92.01 – 93%	2.330%	3.028%	3.802%	4.081%	4.156%
93.01 – 94%	2.376%	3.028%	3.802%	4.286%	4.324%
94.01 – 95%	2.609%	3.345%	3.998%	4.613%	4.603%