The threshold
Refinancing below 20% equity is usually possible and usually not worth it, because a fresh lenders mortgage insurance premium eats the saving you were moving for.
The threshold
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 new loan sits inside the band where no premium applies and where lenders keep their sharper pricing.
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. For most owners who have held for a few years, that difference works in their favour.
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.
Below 80%
Plenty of lenders will do it. The question is not whether you can, it is whether you should, and the answer turns on one fact: LMI does not transfer. Your existing premium was arranged by your current lender for your current loan. Moving means a new policy and a new premium, paid again, for cover that still protects the lender rather than you.
So the sum is straightforward. Work out the annual saving from the better rate, then compare it with the new premium plus the switching costs. Unless the rate gap is unusually wide, the premium tends to swallow several years of savings, which is longer than most people keep a loan before the next repricing conversation.
If you are within a few percentage points of the threshold, the cheapest path is usually to stay put and ask your existing lender to reprice, then refinance later once you are comfortably under 80%. A ten minute review will tell you whether that call is worth making, and it costs nothing either way.
Getting there
Two ways, and most borrowers get there by the second without noticing.
Because the second lever is silent, the crossing is silent too. The equity calculator will tell you where you stand today from two numbers, 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
Equity decides whether a refinance is available. These decide whether it is worth doing.
Add them up, divide by the annual saving, and you have the number of months before the move pays for itself. If that number is longer than you expect to keep the loan, the answer is to negotiate rather than to move.
Questions
Twenty per cent is the number that matters, because it puts the new loan at or below 80% of the property's value and avoids a fresh lenders mortgage insurance premium. Refinancing with less is possible at many lenders, but the LMI on the new loan usually cancels out the saving you were chasing.
Often yes, but check the arithmetic before you do. A new LMI premium is payable on the new loan and it is not transferred from your old one, so you would be paying twice for the same kind of cover. Unless the rate gap is very large, that premium tends to exceed several years of savings.
No. Lenders mortgage insurance is arranged by the lender for that specific loan and it does not follow you. This is the main reason refinancing above 80% so rarely pays. If you have already paid a premium and are still above the threshold, you would be paying a second one to move.
The new lender's. They order their own valuation and calculate the ratio from that figure, not from an online estimate or from what your current lender thinks. A valuation that comes in lower than expected is the most common way a refinance that looked comfortable ends up above 80%.
Expect a discharge fee from your existing lender, government registration fees, and possibly an application or valuation fee at the new one. Individually they are modest and together they are worth counting. A break cost also applies if you are exiting a fixed rate before its term ends.
Sources
Market figures are point in time published figures, checked each time this page is reviewed.
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