Twenty per cent is a useful benchmark. Approval and savings need a separate check.
Less than 20% equity can mean an LMI cost on a new loan. Check the lender’s requirements and the full switching costs before deciding whether refinancing is worthwhile.
The threshold
Why 20% is the number
Lenders mortgage insurance is usually payable when the amount borrowed exceeds 80% of the value of the property.1 Twenty per cent equity is simply the other side of that sentence. Reach it and the loan is at 80% LVR, a common threshold for avoiding a borrower-paid premium. Confirm the lender’s rules and any exceptions.
The ratio itself is the loan amount as a percentage of the value of the asset it was used to buy.2 What makes refinancing different from your original purchase is which value goes in the denominator: the new lender's valuation of the property today, not what you paid for it. That value can be higher or lower than expected.
- Lender's valuation
- $820,000
- 80% of that
- $656,000
- New loan required
- $610,000
- Inside the threshold?
- Yes
1 Moneysmart (ASIC), lenders mortgage insurance (LMI), glossary, retrieved 28 July 2026.
2 Moneysmart (ASIC), loan to value ratio (LVR), glossary, retrieved 28 July 2026.
Above 80% LVR
Refinancing with less than 20%
Refinancing above 80% LVR may be available, subject to lender assessment. A new LMI premium may apply; do not assume an old premium transfers or that every product charges one. Moneysmart’s switching guidance recommends including possible LMI in the costs.
Compare interest and fees over the time you expect to keep the new loan. Include an actual LMI quote, other switching expenses and the outstanding balances at the end of that period. The refinance savings calculatorkeeps repayment changes separate from cost savings.
An option while you are close
An existing-lender rate review is one option to compare while you build equity. Request a written offer and check whether product changes have costs. Use thehome loan review checklistto prepare the discussion.
Getting there
How people actually reach the threshold
A lower loan balance or a higher accepted property valuation can reduce LVR. Neither alone establishes borrowing capacity.
- Paying down the balance. Principal repayments reduce the amount owed. Check extra repayment conditions and preserve cash needed for upcoming expenses.
- The property's value changing. A higher accepted value can reduce LVR; a fall can increase it. Australian dwelling values are tracked monthly by Cotality's Home Value Index.3 A borrower who bought at 90% LVR three years ago may already be well under 80% purely on this.
Because the second lever is silent, the crossing is silent too. The equity calculator provides an indicative position from the values you enter, and how property value estimates work explains how much to trust the value half of it.
3 Cotality, Home Value Index, July 2026 release, released 1 July 2026, reporting June 2026 data.
The other costs
What else to count before you move
Equity is only one part of approval. Equity and borrowing poweranswer different questions. These costs also affect whether switching is worthwhile.
- Discharge fee from your existing lender, for releasing the mortgage.
- Government registration fees for discharging the old mortgage and registering the new one. Set by your state, not negotiable.
- Application and valuation fees at the new lender, frequently waived as part of a switching offer. Ask.
- Break costs if you are leaving a fixed rate before its term ends. These can be large, so obtain a quote for the planned date. Waiting for the fixed term to expire can avoid an early-exit break cost, but other switching fees may remain.
Compare cumulative interest and fee savings against switching costs. Dividing costs by a repayment reduction can mislead because repayments include principal. Use the same remaining term first, then show any term extension separately.
Common questions.
How much equity do I need to refinance?
Twenty per cent equity is a useful reference point because LMI is commonly required above 80% LVR. It is not a universal approval threshold. The lender also assesses income, expenses, debts and its valuation, and product exceptions may apply.
Can I refinance with less than 20% equity?
It may be possible, subject to the lender’s assessment. Ask whether LMI applies, obtain the actual premium and compare interest and fees over your expected holding period. Do not assume either automatic approval or automatic poor value.
Does my existing LMI transfer to the new lender?
Do not assume the old premium covers a new loan. Ask the new lender whether a fresh premium applies and ask the existing lender whether any refund is available under its policy. Include the confirmed amounts in the comparison.
Whose valuation decides it?
The new lender uses a valuation it accepts. An online estimate can help you prepare, but a lower accepted valuation can push the proposed loan above an LVR threshold.
What else does a refinance cost?
Check discharge and registration costs, application and valuation fees, and any fixed-rate break cost. Obtain written figures where possible and include any costs added to the new loan balance.
Sources & content review
Market figures are point in time published figures, checked each time this page is reviewed.
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Keep it all in view.
Your mortgage, equity and borrowing power. Together in Ratey.