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What Happens to Lenders Mortgage Insurance When You Refinance?

LMI is the single cost most likely to change the maths on a refinance — see what refinancing actually costs for the full fee breakdown — and it doesn't work the way most people assume.


It doesn't transfer, it isn't refunded, and whether you pay it again depends entirely on your current equity position. Here's how it actually plays out.

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LMI Doesn't Follow You to a New Lender

Lenders Mortgage Insurance protects your lender, not you — so it's tied to that specific loan with that specific lender.

When you refinance, the original LMI policy stays with the original loan and simply ends when that loan is discharged. It doesn't transfer across, and in almost all cases, it isn't refunded either, even if you're only a short way into the loan term.

The Question That Actually Determines Your Cost

Whether you pay LMI again with your new lender comes down to one number: your loan-to-value ratio (LVR) — how much you owe compared to your property's current value. If your new loan is 80% or less of your property's value, LMI generally doesn't apply at all, regardless of whether you paid it originally.

This is where refinancing can work in your favour. If property values have risen since you bought, or you've paid the loan down over several years, your LVR may now sit comfortably under 80% even though you paid LMI the first time around — meaning you refinance without paying it again.

When You Would Pay LMI Again

  • Your LVR is still above 80%. If you haven't built enough equity yet — through paying down the loan balance, property value growth, or both — the new lender will typically require LMI again, calculated fresh on the new loan amount.
  • You're increasing your loan amount. Cash-out refinances for renovations, debt consolidation, or a deposit on another property push your LVR back up, which can trigger LMI even if your original loan didn't require it.
  • Property values have fallen in your area. A lower valuation increases your effective LVR even if your loan balance hasn't changed.

In any of these cases, it's worth getting an indicative valuation before committing to a full application — it tells you where your LVR actually sits, rather than assuming based on what you originally paid for the property.

When LMI Might Still Be Worth Paying

If refinancing means moving to a materially better rate or structure, paying LMI again can still make sense — the same way it made sense to buy sooner rather than wait to save a full 20% deposit.

The decision comes down to comparing the LMI cost against the savings and benefits of the new loan over a realistic timeframe, not ruling it out automatically.

Find Out Where Your LVR Actually Sits

Before assuming LMI will or won't apply, it's worth properly checking your current equity position. A quick review can confirm your LVR and show whether refinancing makes sense with or without it.

Read the Full Refinancing Guide 
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👤 15+ years mortgage experience 🏦 Accredited with 40+ lenders 📍 Based in North Lakes, helping clients Australia-wide ⭐ Personalised, one-to-one advice 🎓 MFAA Accredited Member 🌐 Part of Australia’s largest aggregation group – LMG

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