First-home buyers entering the Australian housing market in 2025 face a deposit hurdle that has grown taller rather than shrinking, despite the Reserve Bank keeping the cash rate at 4.35 per cent since November 2023. National dwelling values rose 4.8 per cent through the twelve months to February 2025, according to CoreLogic’s hedonic index, pushing the median dwelling price in Sydney past $1.15 million and in Melbourne above $790,000. For a borrower with a 10 per cent deposit on a Sydney median-priced house, the loan-to-value ratio (LVR) sits at 90 per cent—well into lenders’ mortgage insurance (LMI) territory. At that LVR, a single upfront LMI premium can add $25,000 to $35,000 to a loan balance, eroding equity before the first repayment is made.
At the same time, the Australian Prudential Regulation Authority’s (APRA) serviceability buffer of 3 percentage points above the loan rate continues to apply, meaning most borrowers are assessed at an interest rate of 7.35 per cent p.a. or higher. That dynamic makes it harder to service a larger loan, so every dollar of deposit saved—or LMI saved—can be the difference between approval and rejection. Against this background, lenders have sharpened their first-home buyer propositions, some reintroducing LMI waivers that had been quietly wound back in late 2023. Yet not all waivers are equal, and the fine print on LVR ceilings, eligible occupations and loan amounts separates the genuinely useful from the marketing wrapper.
What an LMI waiver actually does
LMI cost for first-home buyers
Lenders mortgage insurance is a one-off premium paid by the borrower to protect the lender if the loan defaults and the property sells for less than the outstanding debt. The premium is typically capitalised into the loan and calculated on a sliding scale. With LVR at 90 per cent, the premium sits around 1.65–2.00 per cent of the loan amount for a $500,000 loan; at 95 per cent LVR it can exceed 3.5 per cent. A first-home buyer borrowing $540,000 at 90 per cent LVR on a $600,000 property could pay roughly $10,530 in LMI, based on Genworth’s premium schedule effective January 2025. That cost buys no equity and no ongoing benefit—it is a sunk insurance charge.
A lender that waives LMI for eligible borrowers strips out that cost entirely. The lender shoulders the risk, typically by holding more capital against the loan in line with APRA’s capital adequacy standards. The waiver is not a grant; it is a risk-pricing decision that the lender recovers through package fees, a slightly higher interest rate, or a narrower occupational gateway.
LMI waiver versus a government guarantee
Borrowers often confuse a lender’s LMI waiver with the federal First Home Guarantee (FHBG), administered by Housing Australia. Under the FHBG, the government acts as guarantor for up to 15 per cent of the property value, allowing an eligible first-home buyer to purchase with a 5 per cent deposit without paying LMI. However, the scheme is capped at 35,000 places nationally each financial year as of the 2024–25 Budget, and price caps apply—$900,000 in Sydney, $800,000 in Melbourne, and lower in regional centres (National Housing Finance and Investment Corporation, FHBG Fact Sheet, 1 July 2024). Lender LMI waivers, by contrast, carry no cap on places, no postcode restrictions, and often allow higher purchase prices, but they typically demand a larger deposit and tie eligibility to the borrower’s occupation or income profile.
Which lenders cut LMI for first-home buyers in 2025
Big-four banks
The major banks have segmented their LMI waiver programs along professional lines, meaning a first-home buyer with the right occupation can access an 85–90 per cent LVR without LMI.
- NAB allows a waiver on its Advantage Plus package for eligible professionals—including medical practitioners, lawyers, accountants, and actuaries—with borrowings up to 90 per cent LVR on loans of up to $2.5 million. The policy document (NAB, Advantage Plus Package Lending Criteria, effective 1 March 2024) specifies that at least one applicant must be in a recognised profession and the loan must be for an owner-occupied purchase.
- Westpac reserves its LMI waiver for customers who meet its Professionals definition and take out a Premier Advantage package. First-home buyers classified as medical, legal or accounting professionals can borrow up to 85 per cent LVR on loans up to $1.5 million without LMI. Westpac’s First Home Buyer Guide (revised 15 January 2025) confirms the waiver applies to both established properties and off-the-plan purchases, provided construction completes within 24 months.
- ANZ does not currently offer a blanket LMI waiver for first-home buyers outside its professional channels, where it permits up to 90 per cent LVR without LMI for ANZ-qualified professionals. Non-professional employees can only escape LMI below 80 per cent LVR or through the Family Guarantee product.
- Commonwealth Bank discontinued its general LMI waiver for first-home buyers in July 2022. Today, its only path to no-LMI borrowing beyond the FHBG is through its Property Share or parental guarantee arrangements, which require a family member’s property as security.
Non-bank lenders and mutuals
Several non-bank lenders have moved to fill the gap left by the majors, often with broader eligibility but tighter LVR ceilings.
- Bankwest (a CBA subsidiary) runs a First Home Owner LMI waiver up to 85 per cent LVR on loans up to $1 million, available to PAYG employees earning above $90,000 p.a. as a single applicant or $150,000 combined. The waiver is embedded in its Complete Home Loan Package, with an annual fee of $395. The policy, updated on 1 October 2024, is open to all industries and does not require a professional designation.
- Pepper Money offers a Specialist Home Loan with no LMI component for first-home buyers who can demonstrate clean credit and stable employment for two years. Maximum LVR is 80 per cent, meaning the waiver functions more as a standard low-LVR loan dressed as a feature; the lender capitalises the risk into a higher rate from 6.49 per cent p.a. (comparison rate 6.78 per cent p.a.) as at February 2025.
- UniBank and Teachers Mutual Bank have sector-specific waivers. Teachers Mutual Bank’s First Home Buyer Loan can be written to 85 per cent LVR without LMI if the applicant is an education or healthcare worker employed on a permanent basis, as per its credit guide dated 1 March 2025. The product carries no annual fee, but the interest rate is 10 basis points above the equivalent LMI-loaded option.
Eligibility fine print
All LMI waiver products share common restrictions. The property must typically be in a capital city or major regional centre; lenders exclude postcodes with high mining or agricultural concentration. The borrower must be an Australian citizen or permanent resident with a minimum clean-credit score of 650 (Equifax) and no adverse listings in the last 24 months. Most lenders also require that the waived loan not be combined with other government grants that materially reduce the lender’s first-loss cushion, though simultaneous use with the First Home Owner Grant is common. Borrowers must hold the loan for at least three years; early discharge within that period can trigger a clawback of the notional LMI premium, typically 1.00–1.50 per cent of the original loan amount.
The serviceability trade-off when LMI disappears
How the 3 per cent buffer interacts with high LVR
APRA’s serviceability buffer, maintained at 3 percentage points above the actual loan rate, acts as a binding constraint for many first-home buyers. A borrower earning $120,000 p.a. with no other debts and $2,000 monthly living expenses would have a maximum borrowing capacity of roughly $560,000 under the buffer test at a 6.44 per cent p.a. assessment rate. If that borrower buys a $600,000 property with a 10 per cent deposit—an LVR of 90 per cent—the required loan is $540,000, consuming 96 per cent of the capacity. There is almost no headroom for rate rises or unplanned costs.
Waiving LMI does not alter the buffer; the same $560,000 cap applies. What changes is the effective equity position. Avoiding a $10,800 LMI premium means the borrower starts with $60,000 equity rather than $49,200 post-LMI capitalisation. That equity buffer can protect against negative equity if prices dip, but it does not improve serviceability in the bank’s calculator. Brokers report that applicants at 90 per cent LVR with an LMI waiver are still frequently declined on serviceability grounds once a full living-expense forensic is applied, particularly where HECS-HELP debt or credit-card limits are present.
The DTI trap
LMI waivers also do not soften debt-to-income (DTI) caps. APRA’s prudential expectation—though not a formal rule—is that lenders limit new lending at a DTI ratio of six times or above to a small share of the book. Westpac’s credit policy, as at February 2025, applies a hard DTI cap of 7.5 times for owner-occupier principal-and-interest loans, with heightened scrutiny above 6 times. For the $120,000-income borrower taking a $540,000 loan, DTI is 4.5 times, safe under any standard. But for a couple earning $150,000 combined targeting a $1 million property with a 10 per cent deposit, the DTI hits 6.0 times immediately, and even with an LMI waiver the loan would face additional assessment hurdles or a potential reduction in maximum LVR to 85 per cent.
When rejecting the waiver saves money
Rate and fee premiums
LMI waivers are rarely free. Lenders offering them often charge a higher interest rate or an ongoing package fee. Bankwest’s LMI-free Complete Home Loan Package, for instance, costs $395 annually and carries a rate 15 basis points above its standard variable rate for a non-waiver loan at the same LVR. Over a five-year period, that differential adds up to $3,750 on a $500,000 loan, which can exceed the one-off LMI premium if the borrower had paid it upfront at 88 per cent LVR. A disciplined first-home buyer should model the total five-year cost: LMI premium plus lower rate versus no LMI plus higher annualised fees.
Policy inflexibility
LMI-waived loans frequently come with stricter terms on redraw, offset, and future loan variations. A borrower who takes an 85 per cent LVR waiver from a non-bank may find that the lender does not permit a top-up further down the line, or that any request for a construction variation triggers a full reassessment that could void the original waiver classification. Additionally, switching lenders later is harder because the new lender will assess the loan at its true LVR—if the property value has slipped, a refinance could then require LMI that was previously avoided, trapping the borrower.
Actionable steps for first-home buyers
- Check occupation eligibility across at least three lenders. Medical, legal, accounting, and teaching professionals should compare NAB’s 90 per cent waiver with Teachers Mutual Bank’s occupation-based product to find the best rate and fee combination. Non-professionals earning above $90,000 should benchmark Bankwest’s offer against a standard 88 per cent LVR loan with LMI capitalised.
- Model the total five-year cost. Request a formal credit quote that shows the repayment schedule with and without the waiver, factoring in annual fees, rate premia, and the estimated LMI premium if applicable. Use a mortgage broker’s software to stress-test the numbers against a 0.50 per cent rate rise.
- Secure pre-approval before making an offer. LMI-waiver policies can change intra-quarter; a pre-approval valid for 90 days locks in the waiver rules at the time of application. Ensure the pre-approval explicitly notes the LMI waiver and the interest rate that applies to it.
- Maintain a buffer deposit even if the waiver allows 90 per cent LVR. Aim to hold at least three months of loan repayments in an offset account. The absence of LMI does not insulate against a change in employment or a drop in property value that could block a future refinance.
- Use an experienced mortgage broker who tracks lender credit policy updates weekly. Direct-to-lender applications often miss niche waiver products from mutuals and non-banks that do not appear on comparison websites. The broker should be able to demonstrate the DTI and buffer calculations for each option before lodging the application.