LMI When Refinancing: Will You Pay It Again?

If you paid LMI when you bought your home and you’re now thinking about refinancing, the question is unavoidable: do I have to pay LMI again? The answer is "it depends" — and there are several ways to refinance without triggering a new premium.

Use the LMI Calculator (toggle "Refinance" in the Loan Type panel) to estimate the cost if a new premium does apply, then read the strategies below to see if you can avoid it.

The short answer

You don’t need to pay LMI again on refinancing if your current LVR is at or below 80%. Property growth and loan paydown often get borrowers under 80% within 2–3 years — at which point you can refinance freely.

You do need to pay LMI again if:

• Your current LVR is still above 80%
• AND you’re changing lenders (most cases)

This happens because LMI is not portable between lenders. Each new lender requires its own LMI premium for high-LVR loans.

Why LMI isn’t portable (the key constraint)

When you took out your original loan, your lender bought an LMI policy from an insurer (Helia, QBE, Arch) covering that specific loan. If you move to a new lender, the new lender needs its own LMI policy because the original one is tied to the original lender.

A few lenders technically offer "LMI refunds" if you refinance away within the first 1–2 years, but these are rare and usually only partial.

Three ways to refinance without paying LMI again

1. Wait until your LVR is under 80%

This is the most common path. On a $700k property bought with 90% LVR ($630k loan):

• Property growth at 5% p.a. for 3 years → $810k value
• Loan paid down via P&I to ~$595k
• New LVR = 595/810 = 73% — well under 80%

You can now refinance to any lender LMI-free. Use the Home Loan Repayment Calculator to project when you’ll cross 80% LVR.

2. Stay with the same lender (internal refinance)

If you stay with your current lender and they’re willing to offer a better rate (often called a rate negotiation or product switch), they don’t require a new LMI policy because the existing one stays in place. This is the easiest "free" refinance — sometimes a 5-minute phone call.

A broker can also negotiate this for you and may secure a sharper rate than the discount you’d be offered direct.

3. Use a "refinance to 80% LVR" strategy

If your loan is at, say, 88% LVR but you have $30k–$50k cash you weren’t planning to spend, you can use it to pay down the loan to 80% LVR as part of the refinance. The new lender then doesn’t require LMI.

This is a big trade-off — you’re tying up cash that could earn returns elsewhere — but it can make sense if you want a much sharper rate elsewhere.

What if you refinance with LMI still applying?

If your LVR is still above 80% and you genuinely need to switch lenders (better rate, better features, lender failure), you’ll pay a new LMI premium based on your current loan amount and current LVR.

Example: refinance scenario

• Original purchase: $700k property, 90% LVR, $630k loan, paid $14,800 LMI 2 years ago
• Today: property worth $735k, loan paid down to $610k, current LVR 83%
• New LMI on refinance = ~$8,500 (lower than original because LVR is lower)

Compare that $8,500 + $400–$800 in switching fees against the rate savings. If the new rate is 0.5% lower on a $610k loan, you save ~$3,000 in year-one interest. Over 5 years that’s ~$15,000 — comfortably more than the $8,900 cost of switching.

Use our Refinance Calculator to model the full break-even.

A common mistake: refinancing to "use equity" without checking LVR

Many borrowers refinance specifically to release equity for renovations or an investment property — and accidentally push themselves back over 80% LVR.

Example:

• Property worth $900k, current loan $580k, current LVR 64%
• Refinance and borrow extra $200k for renovations → new loan $780k, LVR 87%
• LMI now applies on the full $780k loan, not just the new portion → ~$15,000 premium

If you can keep the new loan at or below 80% LVR ($720k in this example), you avoid LMI entirely. Sometimes scaling back the equity release by a small amount is worth tens of thousands.

When investors refinance

Investor refinances are more sensitive to LMI because:

• Investor loadings make the premium 15% higher
• The deduction (over 5 years) helps but doesn’t fully offset
• Many investors refinance specifically to release equity for the next purchase — pushing LVR back up

The good news: investor LMI on a refinance is fully tax-deductible over 5 years, just like the original premium. See LMI for Investment Property for the full deductibility rules.

A simple decision flow

Is your current LVR ≤ 80%?
├── YES → Refinance freely, no LMI
└── NO → Can you stay with current lender for a better rate?
         ├── YES → Negotiate, no LMI
         └── NO → Can you pay down to 80% LVR?
                  ├── YES → Refinance LMI-free
                  └── NO → Calculate: rate savings vs new LMI

Quick tips

• Never refinance without checking your current valuation — the bank’s on-file value may be 18+ months stale and significantly lower than market
• Order a free property valuation from a broker before applying — this confirms your LVR
• Compare multiple lenders’ LMI rates if a new premium is unavoidable — they vary
• Ask about LMI partial refunds if you’re refinancing within 1–2 years of your original loan

Run your numbers

Our LMI Calculator and Refinance Calculator work well together for refinance scenarios. Estimate your new LMI first, then run the full refinance break-even.

Key caution

LMI portability and refund policies vary by lender and insurer. Always confirm with the lender (or a broker) before committing to a refinance — sometimes a small change to the loan structure can avoid LMI entirely.

Next: Capitalised LMI Explained → How to Avoid LMI