Refinancing an investment property in Australia is one of the most practical ways to improve your cash flow, access equity for your next purchase, or escape a lender that’s no longer serving you well. But the process for investment properties differs from refinancing an owner-occupied home in some important ways — and getting it wrong can cost you thousands or limit your future borrowing capacity.
This guide covers when to refinance your investment property, how the process works, what lenders assess, and how to use a refinance to fund portfolio growth.
Why Refinance an Investment Property?
There are four main reasons investors refinance:
- Get a lower interest rate. Even a 0.5% reduction on a $500,000 investment loan saves $2,500 per year in interest — which is deductible, but a saving in your pocket regardless. The investment loan market is competitive, and lenders regularly offer better rates to new customers than existing ones.
- Access equity to fund a new purchase. If your property has grown in value since you bought it, you may have significant equity you can unlock — using it as a deposit on a second investment property without touching your savings.
- Change your loan structure. Switching from principal and interest to interest-only (or vice versa), adding an offset account, moving from fixed to variable — refinancing lets you restructure based on where you are now, not where you were when you first bought.
- Consolidate or clean up debt structure. If you have mixed personal and investment debt, or a loan structure that’s creating tax complications, refinancing can fix it.
When Does Refinancing an Investment Property Make Sense?
Refinancing makes sense when the benefit — lower rate, equity access, better structure — outweighs the cost. Costs to factor in:
- Discharge fee: Your existing lender may charge an exit fee ($150–$400 is common)
- Break costs: If you’re on a fixed rate, breaking it early can cost significantly — sometimes tens of thousands of dollars depending on the fixed rate environment
- New loan establishment fee: Some lenders charge application or establishment fees ($500–$1,500)
- Mortgage registration fee: A government fee for registering the new mortgage ($100–$200)
- Valuation cost: The new lender will typically order a valuation on the property ($200–$500, though many lenders absorb this)
On a variable rate loan, total refinancing costs are typically $500–$2,000. If you’re saving $2,500/year in interest, you break even inside 12 months. The calculation is straightforward — run the numbers before you proceed.
Refinancing to Access Equity: How It Works
Equity is the difference between your property’s current market value and the amount you owe on the loan. If your property is worth $800,000 and you owe $500,000, you have $300,000 in equity. But you can’t access all of it — lenders typically allow you to borrow up to 80% of the property’s value (to avoid LMI).
Usable equity = (80% × market value) − current loan balance
In the example above: (80% × $800,000) − $500,000 = $640,000 − $500,000 = $140,000 in usable equity
This $140,000 can be refinanced out as a separate equity loan (or an increased loan amount), and used as a deposit or purchase costs for a new investment property. This is how experienced investors build portfolios without continually saving new deposits — they use growth in existing properties to fund future purchases.
For more on this strategy, see our detailed guide on how to use home equity to buy an investment property in Australia.
What Lenders Assess When You Refinance an Investment Property
When you refinance, the new lender assesses you as if you were a new borrower. They look at:
- Your current income and expenses. Serviceability is re-assessed from scratch. If your income has dropped, you’ve taken on new debts, or your expenses have risen significantly since you first borrowed, you may find your refinancing options more limited.
- The property value. The lender will order a valuation — either a full inspection or a desktop valuation using comparable sales data. If the value has fallen since you purchased, you may have less usable equity than expected, or may need to pay LMI if your LVR has risen above 80%.
- Your rental income. Investment property lenders typically count 80% of the gross rental income in their serviceability calculation. If the property is currently vacant, some lenders will use the expected market rent; others require an existing tenancy.
- Your existing debt portfolio. If you have other investment properties or personal debts, these all factor into your overall borrowing capacity assessment.
Interest-Only vs Principal and Interest on a Refinance
When refinancing an investment property, many investors choose to switch to or maintain an interest-only (IO) structure. The rationale: the interest portion of investment loan repayments is fully tax-deductible, and IO loans keep repayments lower, freeing up cash flow for other investments.
IO periods on investment loans are typically capped at 5 years by the lender. After that, the loan reverts to principal and interest, increasing your repayments. A refinance is a common way to reset the IO period with a new lender — getting another 5 years of interest-only repayments. This isn’t always available and depends on your equity position and serviceability.
For a detailed comparison of IO vs P&I for investors, see our guide on interest-only vs principal and interest loans for investment properties.
The Refinancing Process: Step by Step
- Review your current loan. Note your current rate, remaining fixed term (if any), and outstanding balance. Request a loan statement from your existing lender.
- Engage a mortgage broker. A broker with experience in investment property refinancing can access dozens of lenders and find the most competitive rates for your situation. They can also identify which lenders will assess your income most favourably.
- Get a property valuation estimate. Before applying, use CoreLogic, Domain, or PropTrack to get a rough estimate of your current property value. This tells you your approximate usable equity.
- Apply with the new lender. Submit your income documentation (payslips, tax returns, rental income statements) and the property details. The new lender orders a formal valuation.
- Receive formal approval. Once approved, the new lender prepares loan documents for you to sign.
- Settlement. The new lender pays out your existing loan, and the mortgage is transferred. Your conveyancer handles the paperwork. Total time from application to settlement is typically 3–6 weeks.
Tax Implications of Refinancing an Investment Property
A few important tax considerations when refinancing:
- The interest on the new loan remains deductible as long as the loan proceeds continue to be used for investment purposes. If you take out extra equity and use it for personal expenses (holiday, personal debt), that portion of the interest is not deductible.
- Loan establishment costs on the new loan are deductible over 5 years (not immediately). Exit costs on the old loan may also be deductible — ask your accountant.
- Be careful with mixed-use redraw. If you redraw from an investment loan for personal expenses after refinancing, the tax treatment becomes complicated. Keep investment and personal borrowings strictly separate.
For the full picture on investment property deductions, see our guide to investment property tax deductions in Australia.
Common Mistakes When Refinancing an Investment Property
- Refinancing too early into a fixed rate period. Break costs on a fixed rate can be substantial. Calculate the break cost before initiating any refinance while on a fixed rate.
- Cross-collateralising with a new lender. Some lenders encourage you to use multiple properties as security for a single loan. This reduces your flexibility and can make it harder to sell one property without the lender’s approval on all. Keep investment loans separate where possible.
- Not shopping around. Many investors refinance only within their existing bank. The best rates are often at a different institution. A mortgage broker can compare the market independently.
- Forgetting to account for the valuation risk. If the property values lower than expected, your available equity may be less than you planned for, affecting your next purchase timeline.
Final Thoughts
Refinancing an investment property is one of the highest-leverage actions you can take to improve your investment position — whether that’s reducing your interest cost, unlocking equity for a second purchase, or restructuring for better tax efficiency. It doesn’t require selling anything and it doesn’t require new savings.
Done well, a refinance every 3–5 years as your equity grows is a core part of how experienced investors grow their portfolios. The key is working with a broker who understands investment lending, running the numbers before you commit, and being disciplined about what you do with any equity you release.
For more on growing your portfolio, see our guide on how to build a property portfolio from scratch in Australia.
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General Advice Warning: This article is general in nature and does not constitute personal financial advice. Please consult a licensed financial adviser before making investment decisions.
