All Categories > Frequently asked questions > Saving for a home loan > What is a Lender Protection Fee (LPF) and when would I need it?

What is a Lender Protection Fee (LPF) and when would I need it?

A Lender Protection Fee (LPF) is a one-off fee you’ll need to pay if you borrow more than 80% of a property’s value (e.g. if you have less than a 20% deposit). It is charged by some lenders instead of Lenders’ Mortgage Insurance (LMI).

An LPF serves a similar purpose to LMI - it helps protect the lender from potential losses if a property is sold following a loan default and the sale proceeds are insufficient to repay the outstanding loan balance.

The LPF is calculated as a percentage of the total approved loan amount, using your LVR at the time the loan is approved. In most situations, it is added to your loan amount, which means you don’t pay the fee up front. However, it does mean your loan repayments will be higher. In some circumstances the lender may let you pay the fee upfront should you wish to, and have funds available to do so.

Factors that affect how much LPF will cost you include:

The size of the loan - the bigger your loan, the higher the LPF.
Your deposit amount - the smaller the deposit, the higher the LPF.
The purpose of the loan - investors can pay an LPF as much as 0.5% more than home buyers.

To avoid paying the LPF, consider saving at least a 20% deposit before applying for a loan.