If you’re asking how much deposit avoid LMI, the short answer is usually 20% of the property’s purchase price, plus enough savings to cover upfront costs like stamp duty, settlement fees and moving expenses. That 20% figure matters because Lenders Mortgage Insurance (LMI) is commonly charged when you borrow more than 80% of the property’s value.
For many Perth buyers, especially first-home buyers, that sounds simple on paper and much harder in real life. Saving a full 20% deposit can take years, and in that time property prices can keep moving. So while 20% is the usual line for avoiding LMI, the better question is whether waiting to reach it makes financial sense for your situation.
How much deposit to avoid LMI in Australia?
In most cases, you need at least a 20% deposit to avoid LMI. If you’re buying a $700,000 home, that means a deposit of $140,000. If you’re buying for $500,000, it means $100,000.
What lenders are really looking at is the loan-to-value ratio, or LVR. This is the percentage of the property’s value that you’re borrowing. If your loan is 80% of the property value or less, LMI usually doesn’t apply. Once you go above 80% LVR, many lenders will charge it.
That said, not every scenario is identical. Some lenders assess LMI based on the lower of the purchase price or valuation. So even if you think you have a 20% deposit, a lower bank valuation can change the numbers and push your LVR above 80%.
What counts as your deposit?
Your deposit is usually made up of genuine savings, but it can also include other acceptable sources depending on the lender. This might be savings in your bank account, equity in an existing property, a cash gift from family, or a guarantor arrangement.
The exact mix a lender will accept depends on the loan product and your overall application strength. Some lenders want to see a history of consistent saving. Others are more flexible if your income is stable and the rest of the file is strong.
This is one reason borrowers can get confused when comparing online advice. Two buyers with the same purchase price and the same dollar deposit may not be assessed the same way by different lenders.
The hidden catch – 20% deposit is not the full amount you need
A common mistake is assuming that if you have 20% saved, you’re done. In reality, you may also need funds for purchase costs, and these can be significant.
In WA, depending on whether you’re eligible for any concessions, you may need to account for stamp duty, conveyancing or settlement agent fees, building and pest inspections, loan application costs if applicable, and moving expenses. If all your savings go towards the deposit, you could still end up short at settlement.
That is why many buyers aim for more than 20% in total available funds. Not because the lender requires a bigger deposit to avoid LMI, but because the overall transaction has costs that need to be covered comfortably.
Can you avoid LMI with less than 20%?
Sometimes, yes. There are exceptions, but they depend on the lender and the borrower profile.
Some professions may qualify for LMI waivers with certain lenders. This is more common for eligible medical professionals and, with some lenders, other higher-income occupations. The policy rules can be strict, and the income threshold or profession list varies.
A guarantor loan can also help. If a parent or close family member uses equity in their property as additional security, you may be able to borrow without paying LMI even if you do not have a full 20% cash deposit. This can be useful, but it also creates legal and financial responsibilities for everyone involved, so it needs careful planning.
There are also first-home buyer schemes that may allow eligible borrowers to buy with a smaller deposit and avoid LMI or an equivalent cost. Eligibility rules, property price caps and lender participation all matter here, so it is worth checking what applies at the time you are ready to buy.
Should you wait to save 20%?
This is where the numbers become more personal. Avoiding LMI is often a good goal, but waiting is not automatically the best move.
If property prices are rising faster than you can save, waiting for a 20% deposit can leave you chasing a moving target. For example, if you buy sooner with a 10% deposit and pay LMI, you may still come out ahead if the property increases in value while you are in the market.
On the other hand, buying with a smaller deposit usually means a larger loan, higher repayments and less buffer if interest rates rise. It can also limit your lender options or borrowing capacity. If stretching to buy now leaves you financially tight every month, waiting could put you in a stronger position.
There is no single answer that suits every buyer. The right decision depends on your income, savings rate, purchase budget, job stability and how long you plan to hold the property.
How LMI affects the total cost of buying
LMI is often described as a one-off insurance premium, but that does not mean it is small. The amount varies depending on your LVR, loan size and lender. The higher the risk from the lender’s point of view, the higher the premium may be.
In many cases, LMI can be added to the loan rather than paid upfront. That can help with cash flow, but it also means you are borrowing more and paying interest on that amount over time.
For some buyers, paying LMI is a strategic choice rather than a mistake. If it helps you buy years earlier, secure a suitable property and stop paying rent, it may be worthwhile. For others, especially if they are only a few months away from a 20% deposit, waiting may save a meaningful amount.
How to work out your target deposit
Start with the purchase price range you are aiming for, not the dream figure in your head. If you are looking at homes around $650,000, a 20% deposit is $130,000. Then add your likely purchase costs on top.
Next, look at what happens if you buy with 5%, 10%, 15% and 20% deposit. Compare repayments, likely LMI, and how much of your savings buffer remains after settlement. This gives you a clearer picture than focusing on one number alone.
Borrowing capacity also matters. In some cases, having enough deposit to avoid LMI does not mean you can comfortably service the loan. A lender will still assess your income, debts, living expenses and other commitments.
This is where tailored advice makes a real difference. A broker can compare lender policies, explain how your deposit will be assessed, and help you see whether avoiding LMI is realistic now or something to work towards over the next 6 to 12 months.
What Perth buyers should keep in mind
Perth’s market conditions can shape the right deposit strategy. If you’re buying in a competitive area, waiting longer to save a bigger deposit can mean facing higher prices later. If you’re buying in a steadier segment of the market, you may have more room to build savings and shop carefully.
Local grants, concessions and lender appetite also change over time. So do interest rates and serviceability rules. What worked for a friend last year may not be the best option for you now.
For first-home buyers in particular, confidence comes from understanding the full picture early. It helps to know your borrowing range, your likely upfront costs, whether you may qualify for any schemes, and what deposit level gives you a comfortable repayment position.
At Aspire Mortgage Services, this is often where buyers gain the most clarity. Instead of guessing whether 10%, 15% or 20% is the right target, you can look at real numbers across different lenders and make a decision that suits your goals.
The practical answer
If you want the clearest rule of thumb for how much deposit to avoid LMI, aim for 20% of the property’s value, plus extra funds for costs. That is the standard benchmark.
But if reaching 20% will delay your plans too long, it may still be worth exploring lower-deposit options. The right path is the one that leaves you able to buy with confidence, manage your repayments comfortably, and move forward without putting unnecessary pressure on your finances.
A good home loan strategy is not just about avoiding a fee. It is about choosing the timing, loan structure and deposit position that fits your life now and still makes sense a few years from now.