Most of us have had some experience with “LMI” or Lenders Mortgage Insurance, either with our first home that we bought with savings scraped together or first investment. Some of us have cringed, balked and been very upset about having to pay this ‘outrageous’ premium that covers the bank from the lender not fulfilling their contractual obligations. The truth is, the banking system in this country is extremely stable and if you had 20% equity in your 
new property you would have lenders falling over themselves to give you the required funds. If you had less than this however, it is a black and white system that automatically puts you into the higher risk category, as anything less than a 20% safety net that the bank is exposed to means the loan is insured for this ‘higher risk.’ In the same way you insure your car for that unforeseen accident, think of this in the same way.
The beauty of this is you can still get your dream home or investment, just tack on a few thousand to the total, and know that the cycles in the property market will reap you rewards making this relatively small extra lend totally worth it. Where investment is concerned, and growing your net wealth (which EVERYONE should do as soon as they can) LMI allows you to put forward as small a deposit as possible (usually 10%), keeping as much equity as possible in your home unused so that you can have a better shot at going again for that second property as quickly as possible. What else? The premiums are usually tax deductible for the first 5 years of your new property, and upon performing a cash flow analysis (provided FREE here) using software aligned with the ATO, one can clearly see that the premium actually works AGAINST your tax and makes little difference in the final weekly outlay, at worst a few dollars. And what do you get? A brand new property to make your future even more secure. So look past the stigma of this little understood insurance, it plays a crucial role in Australia’s retirement future.