Refinance / Restructuring
Can You Refinance With Low Equity?
5 min read- Finance Guide
- Updated 2026
Quick answer
Low equity refinance often becomes harder above
80% 95%
LVR range where policy tightens sharply
- Main issue High LVR
- Extra cost LMI may apply
- Key test Valuation + serviceability
1300 421 044
1300 421 044
Key concepts in low equity refinancing
Loan to value ratio
The higher the LVR, the tighter lender policy usually becomes, especially once the refinance is above 80 percent.
Property valuation
A fresh lender valuation can either help or hurt the file because low equity refinance is heavily driven by the assessed value, not the borrower estimate.
LMI exposure
If the new loan exceeds 80 percent LVR, lenders mortgage insurance may be required and may affect whether the refinance is worthwhile.
Reason for refinance
Rate reduction, debt consolidation, repayment relief, or lender exit all matter because some purposes are easier to place than others at high LVR.
Low equity refinance options
When equity is tight, the strategy often matters as much as the lender.
Like for like refinance
Same debt, better fit
Often the simplest option where the borrower is not trying to raise more funds and only wants a better product or lender policy fit.
LMI backed refinance
Above 80 percent LVR
Some files can still proceed with mortgage insurance, but the cost and total loan size have to stack up.
Debt reduction strategy
Lower the LVR first
Repaying a portion of the debt, adding cash at settlement, or waiting for value recovery may improve lender choice and pricing.
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Lender criteria
Lenders normally review the following when assessing a low equity refinance application:
-
01. Current loan balance against the new valuationLVR test
-
02. Current income, expenses and liabilitiesServiceability
-
03. Repayment history and conduct on the existing loanCredit quality
Common problems with low equity refinance
Valuation comes in lower than expected
A small drop in the lender assessed value can push the refinance above policy limits or trigger mortgage insurance.
Possible solutions include:
Reduce the loan amount requested- Contribute cash at settlement
- Seek an alternative lender valuation path
LMI or fees make the refinance weak
The refinance may technically be possible but the total cost can outweigh the benefit if equity is too low.
Possible solutions include:
- Compare total savings over time
- Wait until equity improves
- Restructure the file to a simpler like for like refinance
Serviceability is too tight
Even if the borrower has been paying the current loan, the new lender may still decline under current servicing rules.
Possible solutions include:
- Reduce debts before applying
- Lower the refinance amount
- Select a lender with stronger policy fit
Steps to get refinancing
Step
01
Confirm the current loan balance and likely property value
Step
02
Estimate the refinance LVR and whether LMI may apply
Step
03
Review income, liabilities and repayment history
Step
04
Select lenders that still accept the target LVR and purpose
Step
05
Submit the application and complete valuation review
Step
06
Settle the refinance with any required top up, fee adjustment, or LMI structure
Speak with a Property Finance Specialist
Low equity refinance cases often need closer lender selection because not every bank handles high LVR refinance the same way.
A specialist can review the equity position, likely valuation result, and the real cost of switching before a full application is lodged.
Speak with a finance specialist about your refinance options.
Submit the short form below and a property finance specialist will review your loan position and discuss possible refinance paths.
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