Lenders mortgage insurance, LMI, is what an Australian lender asks for when your deposit is small. It protects the credit provider if you cannot repay, as Moneysmart puts it, and gives you no cover at all, even though you pay for it. The trigger is the loan-to-value ratio: borrow more than 80% of the property's value and most lenders charge it.
You pay it once, not monthly. You can pay it in cash at settlement or have it added to the loan, and adding it means you pay interest on the premium for the life of the mortgage. On a A$700,000 purchase with a 10% deposit, the loan is A$630,000, and a premium of 2% of the loan, A$12,600, would take it to A$642,600. Insurers and lenders set the price, so it varies from one lender to the next and rises steeply as the deposit shrinks.
It can come back when you refinance. Moneysmart warns that moving to a new lender with less than 20% equity may mean paying LMI again, and suggests asking for a partial refund of the premium on the loan you are leaving.
LMI differs from American private mortgage insurance, which is usually a monthly charge that stops once the balance has fallen far enough. The calculator's New Zealand data carries no such premium; there the Reserve Bank instead limits how much of a bank's new owner-occupier lending may sit above 80% of the property's value.
The Australian mortgage calculator adds LMI to the loan when the deposit is under 20%, using indicative tiers by loan-to-value ratio, so the monthly payment and the total interest both include it.