What Refinancing Actually Involves
Refinancing your mortgage means switching your existing home loan to a new lender or negotiating a new loan structure with your current one. The process typically takes three to six weeks from application to settlement, though this varies depending on lender workload, property valuation requirements, and how quickly you can provide supporting documents.
Most people refinance to access a lower interest rate, but the process also lets you unlock equity for investment or renovations, consolidate debts into your mortgage, or switch loan features like offset accounts or redraw facilities. The application itself mirrors what you went through when you first purchased, but with one advantage: you already own the property, so there's no competing offer or auction deadline pushing you to rush.
Why People Choose to Refinance
The most common trigger is a fixed rate period ending. Borrowers who locked in rates a few years ago often face revert rates that sit well above current variable offerings. In our experience, someone coming off a fixed rate at 5.8% might find variable options closer to 6.2%, or they might discover a new fixed term at a more competitive level depending on market conditions at the time.
Another reason is releasing equity in your property. If your home has increased in value since purchase, you may now have access to funds that can be used as a deposit on an investment property or to fund a major renovation. A home loan health check can identify how much equity you've built and whether refinancing makes sense given your current loan amount and goals.
Some borrowers refinance to improve cashflow. Consolidating personal loans or car debt into a mortgage reduces the number of monthly repayments and can lower the overall interest rate across your debts, though it does mean you're paying off that debt over a longer loan term.
Step 1: Work Out What You Want to Achieve
Before you start the refinance application, be clear on what you're trying to solve. If you're refinancing to access a better interest rate, calculate whether the saving justifies the exit fees, application costs, and any valuation charges. If your goal is to access equity, know how much you need and what you'll use it for, as lenders will ask.
Consider a buyer who refinanced to access equity for an investment property. Their home had increased in value by around 15% over four years, giving them enough usable equity to fund a deposit on a second property without selling or dipping into other savings. The refinance allowed them to maintain their offset account balance while pulling out funds for the new purchase. They also moved from a loan with limited features to one that offered a split between fixed and variable, giving them more control over repayments.
If your fixed rate is expiring, don't wait until the revert rate kicks in. Start the refinance process at least eight weeks before expiry so the new loan can settle in time. Many lenders allow you to lock in a rate up to 90 days before settlement, which protects you if rates move during the application period.
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Step 2: Understand What Documents You'll Need
Lenders assess your refinance application the same way they assess a purchase. You'll need to provide recent payslips, tax returns if you're self-employed, and statements for all bank accounts, credit cards, and loans. They'll also want to see evidence of your living expenses, so expect questions about childcare, school fees, and regular subscriptions.
If you're accessing equity, be prepared to explain what the funds will be used for. Lenders treat equity release differently depending on whether it's for investment, renovation, or debt consolidation. Investment purposes generally receive more favourable treatment than personal spending, as the funds are being used to acquire another asset.
Your current mortgage statement is essential. It shows your loan amount, repayment history, and any redraw or offset balances. Lenders will also check your credit file to confirm there have been no missed payments or defaults since your original loan was approved.
Step 3: Property Valuation and What It Means
Most lenders require a property valuation during the refinance process, either through a desktop appraisal or a physical inspection. The valuation determines how much equity you have and whether the loan amount you're requesting fits within the lender's lending criteria.
If the valuation comes in lower than expected, it can reduce the amount you're able to borrow or require you to pay lenders mortgage insurance if your loan-to-value ratio exceeds 80%. In some cases, a low valuation might mean you can't refinance at all without bringing additional cash to settlement.
Valuations are influenced by recent sales in your area, the condition of your property, and the type of dwelling. Units in high-density developments can be more conservative than freestanding homes, particularly if there's been a lot of new construction nearby. If you've made significant improvements since purchase, mention them upfront so the valuer has context.
Step 4: Submitting the Application and What Happens Next
Once you've chosen a lender and submitted your application, the lender's credit team reviews your financial position and the property valuation. This stage typically takes one to two weeks, though it can stretch longer if the lender requests additional information or if there are delays with the valuation.
If the application is approved, you'll receive a formal loan offer. This document outlines the loan amount, interest rate, fees, and settlement date. Read it carefully. Check that the rate matches what was quoted, that any offset or redraw features are included, and that the loan term aligns with what you requested.
Some lenders include conditions on the approval, such as providing an updated payslip closer to settlement or confirming that certain debts have been closed. If you don't meet these conditions by the deadline, the approval can lapse.
Step 5: Settlement and the Switchover
Settlement is when your new lender pays out your old loan and the refinance becomes active. Your solicitor or conveyancer coordinates this process, transferring funds and registering the new mortgage on your property title. You'll typically need to pay discharge fees to your old lender and establishment fees to the new one, along with any government charges for updating the title.
On settlement day, your old loan is closed and your new loan begins. If you had an offset account with your previous lender, you'll need to transfer that balance to your new account before settlement to avoid any gap in interest savings. The same applies to any direct debits, such as insurance premiums or regular transfers, which should be redirected to your new loan account.
Your first repayment under the new loan usually falls within a month of settlement. Double-check the amount and frequency, particularly if you've switched from fortnightly to monthly repayments or adjusted the loan term.
Fixed Rate Expiry and Timing Your Refinance
If you're coming off a fixed rate, the timing of your refinance matters. Exiting a fixed loan early often triggers break costs, which can run into thousands of dollars depending on how much time is left and how far rates have moved since you fixed. Once your fixed rate period ends, those break costs disappear, but you'll revert to your lender's standard variable rate, which is usually higher than the rates available to new customers.
Start comparing options three months before your fixed term expires. This gives you time to apply, get approval, and settle the new loan without spending too long on the revert rate. Some borrowers assume their current lender will offer a retention rate to keep them, but that's not guaranteed, and it's rarely as competitive as what you'd access by refinancing elsewhere.
When Refinancing Doesn't Make Sense
Refinancing isn't always the right move. If you're within two years of paying off your loan, the cost of refinancing might outweigh any interest savings. Similarly, if your property has declined in value or you've drawn down heavily on redraw, your loan-to-value ratio might have increased to the point where refinancing requires lenders mortgage insurance.
Another scenario to watch for is when your employment or income situation has changed. Lenders assess your ability to service the new loan based on current income, so if you've reduced your hours, changed jobs, or moved from permanent to contract work, you may not qualify for the same loan amount you hold now. In that case, staying with your current lender and negotiating a lower rate directly can be a more practical option.
How a Mortgage Broker Fits Into the Process
A mortgage broker manages the refinance application on your behalf, comparing loan products across multiple lenders and identifying which ones suit your situation. They also handle the paperwork, liaise with valuers and solicitors, and follow up on any conditions attached to your approval.
Brokers have access to lender policies that aren't published online, which can make a difference if your situation involves self-employment, recent credit issues, or an unusual property type. They can also help you understand whether switching to a fixed interest rate, variable interest rate, or a split loan structure makes sense given where rates are headed and how long you plan to hold the property.
If you're looking to refinance your home loan, working with a broker means you're not limited to the products advertised by the big four banks. Many smaller lenders offer competitive rates and features but don't have the same brand presence, and a broker can connect you with those options.
What Happens If Your Application Is Declined
A declined refinance application usually comes down to serviceability, valuation, or credit history. If your expenses have increased since you first borrowed, or if interest rates have risen significantly, the lender might determine that you can't afford the new loan even though you've been making repayments on the existing one without issue.
In that case, you have a few options. You can try a different lender with more flexible serviceability calculations, reduce the loan amount you're requesting, or wait until your financial position improves. Some lenders also allow you to include rental income from an investment property or border payments to boost your serviceability, though they'll typically only count a portion of that income.
If the issue is a low valuation, you might need to wait for the property market to recover or bring additional savings to settlement to reduce your loan-to-value ratio. Alternatively, consider whether staying with your current lender and requesting a rate reduction is a viable interim solution.
Call one of our team or book an appointment at a time that works for you. We'll walk through your current loan, explain what's available, and manage the refinance process from application to settlement.
Frequently Asked Questions
How long does the refinance process take from start to finish?
The refinance process typically takes three to six weeks from application to settlement. This timeframe can vary depending on lender workload, how quickly you provide documents, and whether the property requires a physical valuation or desktop appraisal.
Do I need a property valuation when refinancing?
Yes, most lenders require a property valuation during refinancing to determine your current equity and loan-to-value ratio. This can be done through a desktop appraisal or a physical inspection, depending on the lender's requirements and the property type.
What documents do I need to provide for a refinance application?
You'll need recent payslips, tax returns if self-employed, bank statements for all accounts, credit card statements, evidence of living expenses, and your current mortgage statement. If accessing equity, lenders will also ask for details on how the funds will be used.
Can I refinance if my property value has decreased?
You can still refinance if your property value has decreased, but it may limit your options. A lower valuation increases your loan-to-value ratio, which might require lenders mortgage insurance or reduce the amount you can borrow.
When should I start the refinance process if my fixed rate is ending?
Start the refinance process at least eight weeks before your fixed rate expires. This gives you time to apply, receive approval, and settle the new loan before reverting to your lender's standard variable rate, which is typically higher than new customer rates.
