Many people who bought with a small deposit, or whose property value has slipped, ask us the same question: "I don't have 20% equity. Can I still refinance?"
Usually yes, but there are costs and limits to understand first.
What "20% equity" means
Equity is the difference between what your home is worth and what you owe. If your home is worth $800,000 and you owe $680,000, your equity is $120,000, or 15%. Your loan-to-value ratio (LVR) is 85%.
Most lenders charge Lenders Mortgage Insurance (LMI) when the LVR is above 80%.
The main issue: paying LMI again
LMI protects the lender, and it's tied to that lender. If you paid LMI when you bought and now refinance above 80% LVR with a new lender, you'll usually pay LMI again.
On larger loans, that can be thousands of dollars, which often wipes out the benefit of a lower rate.
When it can still make sense
- The rate saving is large. If you're paying a high rate, the savings may outweigh LMI within a few years.
- You're consolidating expensive debt. Clearing credit cards and personal loans at 15% to 20% interest can justify LMI.
- Your LVR is close to 80%. LMI premiums are lower at 81% to 85% than at 90% to 95%.
- You're getting an LMI waiver. Some lenders waive LMI for certain professions, such as medical professionals, lawyers and accountants, up to 90% LVR.
Ways to get under 80%
Check your property value properly. Online estimates can be wrong both ways. A broker can order valuations from different lenders' valuers.
Pay a lump sum. If you have savings, paying down the loan before refinancing can bring you under 80%.
Wait. Every repayment reduces your loan. Combined with any growth, you may cross 80% within months.
Use money in offset. Funds in an offset can be used to reduce the loan balance at refinance.
If refinancing isn't worth it
Negotiate with your current lender. They don't charge LMI again for you to stay, and many will reduce your rate if you ask with a competing offer in hand. See how to negotiate a lower rate.
Falling values in 2026
According to Cotality, Sydney values were down 7.0% over the year to September 2026 and Melbourne down 6.2%. Some borrowers who were comfortably under 80% a year ago may now be above it. Before you apply anywhere, get a sense of your current value so there are no surprises.
A quick example
Sam owes $640,000 on a property now valued at $760,000 (84% LVR). He's paying 6.99% and could get 6.29% elsewhere with 25 years remaining.
- Monthly saving: about $280
- Annual saving: about $3,360
If LMI to refinance were around $5,000, he'd recover it in under 18 months. If LMI were $12,000, it would take three and a half years. In that case, negotiating with his current lender first is the smarter move.
Frequently asked questions
Can I get a refund of my original LMI if I refinance?
Generally no. LMI isn't refundable once the loan settles, apart from limited cases in the first year or two with some insurers.
Can I refinance at 95% LVR?
Some lenders allow it, but options are limited and LMI is expensive. It's usually only worthwhile for debt consolidation or exceptional rate savings.
Can I use the 5% Deposit Scheme to refinance?
No. The scheme only applies to purchases.
Not sure where your LVR sits? Call Finfident on 0424 545 654. We'll check your property value and tell you whether refinancing or negotiating is the better option.
This article is general information only and doesn't take into account your objectives, financial situation or needs. Figures, rates and scheme rules are current as at October 2026 and can change. Finfident Finance Brokers (ABN 94 679 280 801) is Credit Representative 569374 of Outsource Financial Pty Ltd (ACN 131 090 705), Australian Credit Licence 384324.