Lenders Mortgage Insurance (LMI) is a type of insurance that lenders require when a borrowers down payment is less than 20% of the property value. It is insurance that a lender takes out to insure itself against the risk of not recovering the outstanding loan balance if the borrower defaults on their loan. LMI is not mortgage protection insurance, which a borrower might separately take out to insure themselves against the risk of not being able to meet their loan payments. LMI is a one-off, upfront payment, payable when a borrower has a deposit less than 20% of the home’s price. The borrower pays the fee to the lender at settlement time who then pays the insurer, and the policy is good for the life of the mortgage, regardless of its length. LMI protects the lender, not the borrower. The more expensive the property and the less the deposit, the higher the LMI fee. LMI helps people buy homes. If a borrower wants to buy a home and otherwise meets lender requirements but does not have a substantial deposit (usually 20%), it can be difficult to find a lender who will lend to them. If the borrower is in this situation, LMI helps make it easier for them to obtain mortgage finance by reducing the risk of loss to the lender if they stop paying their loan repayments.