Low equity margin (LEM) and low equity fee (LEF)

A low equity margin (LEM) is an interest rate loading applied by a lender when borrowing exceeds a threshold — usually 80% LVR. A low equity fee (LEF) is the same thing charged as a one-off amount instead.

How it works

Structures vary by bank. Commonly the margin steps up in bands — a smaller loading at 80–85% LVR, larger at 85–90%, larger again above that. Some banks offer a choice between a margin and a fee.

On a large loan, an LEM can add thousands of dollars a year.

The part most borrowers miss

It can usually be removed once your LVR improves, but the bank generally will not do it automatically. You have to ask.

If your property has grown in value or you have paid down principal enough to bring the LVR below the threshold, you can request the margin be removed. The bank will typically require evidence of value — sometimes a registered valuation, sometimes a desktop or rating valuation.

Investors have paid a low equity margin for years after they stopped needing to, simply because nobody told them to ask.

Common misunderstanding

A margin and a fee cost different amounts depending on how long you hold. A one-off fee may be cheaper if you expect to move above the threshold quickly; a margin may be cheaper if you refinance soon. Model both.

It's separate from mortgage insurance. New Zealand does not generally use lenders' mortgage insurance in the way Australia does — the LEM is the local equivalent mechanism.

Related terms

Last reviewed: 1 August 2026 · General information only, not financial advice.

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