How to Refinance an Investment Property in Australia

What refinancing an investment property means🔗

Refinancing replaces your existing investment loan with a new one. The new loan pays out the old one, and you start fresh with new terms. There are two flavours: a rate review or variation stays with your current lender (less paperwork, negotiate better terms), while a full refinance moves you to a new lender entirely (more admin, often a bigger rate cut).

Investment loans are priced differently from home loans. Lenders typically add a premium of 0.2 to 0.6% over an equivalent owner-occupier loan, and interest-only investment loans are priced higher again. Serviceability is also assessed differently: lenders count your rental income but shade it to around 70 to 80% for vacancy and costs, then stress-test repayments at your rate plus a 3% buffer. If your new rate is 6.2%, you are assessed at 9.2%.

Why investors refinance🔗

The six most common reasons, with the honest version of each:

If your main goal is simply a better rate, our home loan refinancing guide and top-up vs refinance cover the mechanics that apply to both.

How to refinance, step by step🔗

1. Review your current loan. Note your rate, whether it is P&I or interest-only, any remaining fixed period, break costs (ask the lender for the exact figure in writing), and your current LVR.
2. Check your equity and usable equity. Usable equity is (property value x 80%) minus your outstanding loan. The worked example below shows it.
3. Compare lenders on comparison rates, not headline rates, across at least three lenders. Check the lender is an AFCA member.
4. Get a valuation. The lender orders their own. If it comes in lower than expected, your LVR rises and LMI may apply.
5. Apply with documents: lease agreement and rental statements, tax returns showing rental income, payslips, existing loan statements, and council rates or strata notices.
6. Discharge the old loan and settle. The new lender pays out the old one; you pay a discharge fee (about $150 to $400). The whole process usually takes 4 to 8 weeks.

The numbers to run before you switch🔗

Do not refinance on vibes. The costs that decide whether it is worth it:

• Break costs on a fixed loan can run into thousands, based on wholesale rate movements. Get the exact figure in writing first.
• Discharge fee: about $150 to $400 to the outgoing lender.
• Application and valuation fees: $0 with some lenders, up to roughly $1,100 with others.
• LMI if your LVR exceeds 80%, which on an investment loan can be $5,000 to $20,000+. It is not transferable, so if you paid it before, you pay again when you switch.

The tax trap: purpose beats security🔗

This is the section most investors skip, and the one that costs the most. The ATO allows you to deduct interest on borrowings used to buy income-producing assets, including an investment property. But the rule that trips people up is this: deductibility follows the purpose of the borrowing, not the property securing it.

If you refinance and cash out equity, the interest on that extra borrowing is treated by what you do with it:

• Buy another investment or income-producing asset: the interest on that amount is deductible.
• A holiday, a car, or paying down your own home loan: the interest is not deductible, even though the loan is secured against your investment property.

If you are borrowing for both investment and private purposes, split the loan at refinance so the deductible and non-deductible portions never mix. A blended, contaminated loan is a compliance headache. See our guides on investment property tax deductions and negative gearing, and get advice from a registered tax agent before you lodge.

Cashing out equity to fund the next deposit🔗

Releasing equity from one investment property to fund the deposit on the next is one of the most common ways Australians build a portfolio. It works, but it also increases your total debt and repayments, so it deserves clear-eyed maths.

That $180,000 could fund a deposit and costs on a property worth up to roughly $720,000 (a 20% deposit of $144,000 plus about $36,000 for stamp duty and acquisition costs). But having usable equity does not guarantee approval: the lender still assesses your serviceability across both loans. A sensible rule of thumb is to keep a cash buffer of 3 to 6 months of total repayments before you draw down for the next purchase, because the strategy gets painful if values fall, rates rise, or a property sits vacant. Our using equity to buy an investment property guide goes deeper.

How it differs from refinancing a home loan🔗

If you have refinanced your own home before, the process feels familiar, but investment loans differ in five ways:

• Pricing: a 0.2 to 0.6% premium over owner-occupier rates, higher again for interest-only.
• Serviceability: rental income shaded to 70 to 80%, plus the 3% APRA buffer on top of the rate.
• Interest-only: available but usually capped at 5 years, and you are assessed on the P&I repayment even during the interest-only period.
• LMI: generally higher than owner-occupier at the same LVR. See what LMI is and how it is priced.
• Documentation: you also need the lease, rental statements, and often two years of tax returns showing rental income.

Frequently asked questions🔗

Sources🔗

1. ATO, rental property interest expenses
2. ASIC Moneysmart, property investment
3. APRA, news and publications (serviceability buffer)
4. AFCA, Australian Financial Complaints Authority

General information only, not personal financial or tax advice. It does not take your circumstances into account. Consider a licensed mortgage broker, financial adviser, and registered tax agent before acting.