Most first-home buyers (and some other property buyers) will have to pay mortgage insurance, otherwise known as Lender's Mortgage Insurance (LMI). This payment isn't designed to protect you—it's designed to protect the bank or lender who gave you the mortgage.
Effectively, mortgage insurance is a one-off repayment that secures the lender if you fail to make your home loan repayments.
Your deposit determines whether you are liable for mortgage insurance. In most cases, you need more than 20% of the total value of the property to avoid taking out mortgage insurance. However, this can vary based on the circumstances of both the lender and the borrower.
The cost of mortgage insurance also varies. The cost is based on several factors, including the size of the loan, your deposit, your employment status, the value of the property you’re buying, the term of your mortgage, your savings, and the lender’s insurer.