Do You Pay LMI Again When Refinancing? What Australians Need to Know

If you paid Lenders Mortgage Insurance when you first bought your home, the thought of paying it again when refinancing is understandably frustrating. LMI is not cheap — it can cost $10,000 to $40,000+ — and the idea of paying that a second time to simply switch lenders feels unreasonable.

The short answer: LMI is not transferable between lenders. If you refinance and your loan-to-value ratio (LVR) is above 80% with the new lender, you may be required to pay LMI again. But there are several scenarios where you will not pay it, and strategies to ensure you never face this cost a second time.

How LMI Works When Refinancing

To understand why LMI might apply again, you need to understand what LMI actually covers.

Lenders Mortgage Insurance is a policy between your lender and an insurance provider (Helia, QBE, or Arch in Australia). It protects the lender — not you — against the risk of you defaulting on the loan. When you paid LMI at purchase, you paid for a policy that covered your original lender.

Here is the critical point: that policy is specific to the original lender. It does not follow you if you move your loan to a different lender. If the new lender assesses your loan as above 80% LVR, they have no LMI coverage — and they will require you to take out a new policy.

This is why refinancing above 80% LVR often triggers LMI again.

When You WILL Pay LMI Again

You will likely be required to pay LMI when refinancing if all of the following are true:

1. You Are Switching to a Different Lender

Since LMI policies are lender-specific, moving to a new lender means the previous policy provides no coverage. The new lender treats you as a fresh borrower for LMI purposes.

2. Your LVR Is Above 80% With the New Lender

The new lender will assess your property’s current value and your outstanding loan balance. If the loan exceeds 80% of the current property value, LMI applies.

Important: The new lender may value your property differently from your original lender. A lower valuation increases your LVR, potentially pushing you above 80% even if you thought you were at or near the threshold.

3. You Do Not Qualify for an LMI Waiver

If you are not in a profession that qualifies for an LMI waiver and have no other exemption, the full LMI premium applies.

Worked Example: Paying LMI Twice

Original purchase (3 years ago):

Property price: $800,000
Deposit: $80,000 (10%)
Loan: $720,000 (90% LVR)
LMI paid: $16,000

Today — refinancing with a new lender:

Current property value: $850,000
Outstanding loan balance: $695,000
Current LVR: 81.8%
LMI payable on refinance: ~$3,500–$5,000

In this scenario, you have already paid $16,000 in LMI at purchase. Because your LVR is still above 80%, the new lender charges another $3,500–$5,000. Your total LMI cost across both loans: approximately $20,000.

This is money that protects lenders, not you, and it is one of the most common frustrations borrowers face when refinancing.

When You WON’T Pay LMI Again

Several scenarios allow you to refinance without paying LMI a second time.

1. Your LVR Has Dropped to 80% or Below

If your outstanding loan balance is 80% or less of your property’s current value, no lender will charge LMI. This happens through a combination of:

Principal repayments — each mortgage payment reduces your loan balance
Property value growth — if your property has increased in value, your LVR drops even if your loan balance has not changed much

Example:

Original loan: $675,000 on a $750,000 property (90% LVR)
After 4 years: loan balance $640,000, property now worth $900,000
Current LVR: 71.1% — well under 80%, no LMI on refinance

Use the LMI calculator to model your current LVR based on estimated property value and loan balance.

2. You Stay With Your Current Lender

If you renegotiate your loan terms with your existing lender (rate reduction, switching from variable to fixed, or changing loan features), the original LMI policy remains in place. You are not refinancing to a new lender, so no new LMI is triggered.

Many lenders offer retention deals to keep your business — particularly if you tell them you are considering switching. This can include rate discounts, cashback offers, or fee waivers.

Limitation: Retention offers are not always competitive. If a competitor offers a significantly better rate, staying with your current lender just to avoid LMI may cost you more in the long run.

3. You Qualify for a Professional LMI Waiver

This is the most powerful option for eligible borrowers. Certain lenders waive LMI entirely for professionals in specific fields — even at LVRs above 80%. This means you can refinance to remove LMI and avoid paying it with the new lender.

Professions that typically qualify include:

Medical professionals — doctors, dentists, optometrists, veterinarians, pharmacists
Legal professionals — lawyers, barristers, solicitors
Financial professionals — accountants (CPA/CA), actuaries, financial planners
Engineers — all disciplines
IT professionals — earning above income thresholds
Nurses and midwives — registered with AHPRA
Teachers — registered with a state teaching authority
Other professions — paramedics, police officers, public servants

If you qualified for an LMI waiver when you purchased but did not use one (perhaps you were not aware of the option), refinancing to a lender that offers the waiver means you eliminate LMI entirely going forward. No second payment, no ongoing cost.

Check if your profession qualifies — it takes 60 seconds and there is no credit check.

4. The New Lender Offers an LMI-Free Threshold Above 80%

Some lenders waive LMI for standard borrowers (not just professionals) at LVRs up to 85%. If your LVR is between 80% and 85%, these lenders allow you to refinance without LMI — no professional waiver or government scheme required.

This is not widely advertised, and a mortgage broker who knows which lenders offer these thresholds can match you with the right option.

Is LMI Transferable Between Lenders?

No. LMI is not transferable between lenders in Australia. The policy is a contract between the original lender and the insurer. If you refinance with a different lender, that lender has no coverage under your original LMI policy and must assess LMI independently.

Some borrowers assume that because they paid LMI once, they are “covered” indefinitely. This is not the case. LMI coverage applies only to the specific loan with the specific lender where the policy was issued. Move the loan, and the coverage does not follow.

What About the First Home Guarantee (FHBG)?

If you purchased under the First Home Guarantee scheme, the government guarantee operates similarly to LMI — it is specific to the participating lender. If you refinance with a non-participating lender while your LVR is above 80%, the guarantee does not transfer, and the new lender will require LMI.

Some participating lenders can transfer the guarantee, but this is not guaranteed (no pun intended) and adds complexity to the refinancing process.

How to Avoid Paying LMI When You Refinance

If you are considering refinancing and want to avoid paying LMI a second time, here are the most effective strategies, in order of effectiveness:

Strategy 1: Use a Professional LMI Waiver

If you are in an eligible profession, this is the simplest and most powerful approach. Refinance to a lender that offers LMI waivers for your profession, and the premium is eliminated entirely — regardless of your LVR (up to the lender’s maximum, typically 90% or 95%).

This is particularly valuable if your LVR is still above 80% and you cannot wait for it to drop. You get a better rate, remove LMI costs, and gain full flexibility to switch lenders in the future.

Learn more about refinancing to remove LMI.

Strategy 2: Wait Until Your LVR Drops Below 80%

If you are not in an eligible profession, the most straightforward approach is to wait until your equity reaches 20%. This happens through:

Regular repayments — principal and interest loans steadily reduce your balance
Extra repayments — even small additional payments accelerate equity growth
Property growth — market appreciation reduces your LVR without any action on your part

You can accelerate this by making extra repayments into your offset account or directly onto the loan principal.

Strategy 3: Get an Updated Property Valuation

Your lender’s valuation of your property may be outdated or conservative. If property prices in your area have risen since purchase, an updated valuation could show your LVR has already dropped below 80%.

You can request a formal valuation through your lender (usually $300–$600) or use online estimate tools as a preliminary guide. If the updated valuation confirms your LVR is at or below 80%, you can refinance without LMI.

Strategy 4: Make Extra Repayments Before Refinancing

If your LVR is just above 80%, a lump sum payment before refinancing could push you below the threshold. For example:

Outstanding loan: $620,000
Property value: $750,000
Current LVR: 82.7%
Amount needed to reach 80% LVR: $20,000
After $20,000 lump sum: loan $600,000, LVR 80% — no LMI

If you have savings, a bonus, or other funds available, this targeted approach can save you thousands in LMI.

Strategy 5: Negotiate a Retention Offer With Your Current Lender

If your primary motivation for refinancing is a better interest rate, call your current lender first. Ask their retention team what they can offer. Many lenders will match or come close to competitor rates to keep your loan — and since you are staying with the same lender, no new LMI applies.

This is not always the best long-term solution, but it avoids the LMI issue entirely.

How Much Does LMI Cost When Refinancing?

LMI costs on refinancing are calculated the same way as on a new purchase — based on your LVR and loan amount. However, because your LVR is likely lower than at original purchase (assuming you have made repayments and/or the property has grown), the premium is typically lower.

Indicative LMI costs at common refinancing LVR bands:

Outstanding Loan	Property Value	LVR	Estimated LMI
$550,000	$650,000	84.6%	~$4,200
$620,000	$750,000	82.7%	~$4,800
$680,000	$800,000	85.0%	~$5,500
$760,000	$850,000	89.4%	~$12,000

Even at the lower end, $4,000 to $5,000 is a significant cost for switching lenders. In many cases, the interest rate savings need to be substantial to justify paying LMI again.

Use the LMI calculator to estimate your specific cost.

The Break-Even Calculation: Is Refinancing Worth It Even With LMI?

Sometimes paying LMI again is justified if the interest rate savings are large enough. Here is how to calculate whether it makes financial sense:

Step 1: Determine the LMI cost on the new loan (use the LMI calculator)

Step 2: Calculate the annual interest saving

Current rate: 6.50% on $620,000 = $40,300/year in interest
New rate: 5.99% on $620,000 = $37,138/year in interest
Annual saving: $3,162

Step 3: Calculate the break-even point

LMI cost: $4,800
Annual saving: $3,162
Break-even: 1.5 years

If you plan to stay with the new lender for more than 1.5 years, refinancing and paying LMI again is financially beneficial in this example. If you might switch again within that period, it is not worth it.

Frequently Asked Questions

Does LMI transfer when you refinance?

No. LMI is not transferable between lenders in Australia. The policy covers the original lender only. If you refinance with a new lender and your LVR is above 80%, you will need a new LMI policy or an LMI waiver.

Can you get an LMI refund when you refinance?

In some cases, yes. If you refinance within the first 1–2 years of the original LMI policy, some insurers (Helia, QBE, Arch) offer partial refunds. After 2 years, refunds are rare. Contact your original lender to inquire — they submit the refund request to the insurer on your behalf.

How do I check my current LVR?

Divide your outstanding loan balance by your property’s current estimated value, then multiply by 100. For example: $620,000 loan ÷ $800,000 property value = 0.775 × 100 = 77.5% LVR. If it is 80% or below, no LMI applies on refinancing.

Is it worth refinancing if I have to pay LMI again?

It depends on the interest rate saving and how long you plan to keep the loan. Calculate the break-even point (LMI cost ÷ annual interest saving). If you will stay with the new lender beyond the break-even period, it is worth it. If not, consider waiting until your LVR drops below 80% or using a professional waiver.

Can I refinance part of my loan to avoid LMI?

Some borrowers split their loan — refinancing the portion up to 80% LVR with a new lender and leaving the remainder with the original lender. This is complex and not all lenders support it, but it can eliminate LMI on the refinanced portion. A mortgage broker can advise on whether this structure suits your situation.

What if I paid LMI under the First Home Guarantee?

If you purchased under the FHBG, you did not pay LMI — the government guarantee covered it. If you refinance with a non-participating lender while your LVR is above 80%, you will need to pay LMI for the first time with the new lender.

How long does it take for LVR to drop below 80%?

This depends on your repayment amount, interest rate, and property growth. On a typical 30-year principal and interest loan, repayments alone might take 5–8 years to bring LVR from 90% to 80%. With property growth of 3–5% per year, this timeframe can shorten to 3–5 years. Extra repayments accelerate the process further.

The Best Strategy: Professional LMI Waivers

For eligible professionals, the most effective approach to the “do I pay LMI again” problem is to ensure you never need to worry about it. A professional LMI waiver eliminates LMI on both your original purchase and any future refinancing — no matter what your LVR is (within the lender’s maximum).

This means:

No LMI when you buy — saving $10,000 to $40,000+
No LMI when you refinance — saving another $3,000 to $15,000+
Freedom to switch lenders whenever a better deal is available, without LMI as a barrier
No need to wait for 80% LVR before refinancing

If you are in an eligible profession and paid LMI when you first purchased, refinancing to a lender that offers the waiver is one of the smartest financial moves you can make.

Ready to find out if you qualify?

Check your eligibility — free, 60 seconds, no credit check
Learn about refinancing to remove LMI
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