When to Refinance & How the Approval Process Works

Refinancing puts your entire loan under the same scrutiny you faced when you first borrowed.

The approval process mirrors your original home loan application in most respects. Your lender will assess your income, confirm your expenses, run a credit check, and revalue the property. The difference is that you're not applying as a first-time borrower anymore. You're an existing homeowner with a repayment history, which can work in your favour if you've made every repayment on time. If you've missed payments or your financial situation has changed, that history will surface during the assessment.

Your Income Gets Reassessed From Scratch

Your lender won't assume your income is the same as when you first borrowed. They'll request current payslips, recent tax returns if you're self-employed, and bank statements that show your income landing in your account. If you're on a single income, lenders apply a close lens to your ongoing employment stability and any probation periods if you've changed jobs recently. Consider a buyer who refinanced to access a lower rate after moving from a permanent role to a contract position. The new lender required a signed contract showing at least six months remaining, plus confirmation from the employer that renewal was likely. Without that documentation, the application stalled despite the borrower having solid equity and a spotless repayment record. The lender eventually approved once the contract was extended, but it delayed settlement by three weeks.

If your income has dropped since you first borrowed, or if you've taken on additional debt, your borrowing capacity may no longer support the existing loan amount. Some lenders will decline the application outright. Others may approve with conditions, such as requiring you to reduce other debts first. This is one reason a loan health check before lodging an application can prevent wasted time.

Property Valuation Shapes What You Can Access

Lenders order a new valuation when you refinance, even if you're staying with the same loan amount. The valuation determines your loan-to-value ratio, which affects whether you'll need to pay lenders mortgage insurance and what rate you'll be offered. If your property has increased in value since purchase, your equity position improves and you may qualify for a lower rate tier. If the property has declined in value, or if the valuer's assessment comes in lower than expected, you may find yourself with less equity than you thought. In some cases, this can block the refinance entirely if the LVR no longer meets the lender's criteria.

Melbourne suburbs with smaller unit markets, like Box Hill or Clayton, sometimes see valuation volatility depending on recent comparable sales. A valuer assessing a two-bedroom apartment might rely on just two or three sales in the past three months, and if those sales were distressed or off-market, the valuation can undershoot your expectation. You won't control the valuation outcome, but you can influence it by providing recent sales evidence for similar properties in your building or street if you're aware of them. Your broker can submit this information to the valuer during the process.

Credit History and Existing Debts Are Reviewed Again

Your credit file gets pulled again during the refinance application. Any missed payments, defaults, or credit inquiries since your original loan will appear. Lenders also reassess your current debts, including credit cards, personal loans, car loans, and buy-now-pay-later accounts. Even if you don't carry a balance on a credit card, the lender will factor in the full limit as a potential liability when calculating your borrowing capacity. If you've opened new credit accounts since buying your home, those limits can reduce what the lender is willing to approve.

In our experience, single-income borrowers often underestimate how much a small personal loan or car finance arrangement can affect a refinance application. A buyer refinancing to consolidate debts discovered that the combined limits on two credit cards, a $15,000 car loan, and an outstanding Afterpay balance meant the new lender wouldn't approve the refinance without first closing the credit cards and paying down the car loan. Once those debts were cleared, the application proceeded, but the process took an extra month.

Loan Features and Policy Changes Between Lenders

Lenders update their policies regularly, and what was available when you first borrowed may not exist anymore. Offset accounts, redraw facilities, and the ability to make extra repayments without penalty vary widely. Some lenders have removed certain features from new loan products, while others have tightened their lending criteria for specific borrower types. If you're self-employed or on a single income, you may find that some lenders who would have approved your original loan no longer lend to your profile, or they now require a larger deposit equivalent.

When comparing options, consider not just the rate but the features that support how you manage your mortgage. If you rely on an offset account to reduce interest while keeping cash accessible, refinancing to a loan without that feature will cost you flexibility even if the rate looks lower on paper. Similarly, if your current loan allows unlimited extra repayments and you're planning to pay down the loan faster, switching to a product that caps extra repayments or charges for redraw access can undermine your strategy. You can explore refinancing options that preserve the features you need through a service like home loan refinancing, which compares features across lenders rather than focusing solely on rate.

Settlement Timing and Costs You'll Encounter

Refinancing takes between four and six weeks on average, though it can stretch longer if valuations are delayed or if the lender requests additional documentation. You'll need to account for discharge fees from your current lender, settlement fees, and potentially government charges depending on your state. Some lenders offer cashback incentives or cover certain costs, but you'll need to weigh those against the ongoing rate and fees over the life of the loan. A cashback that looks appealing upfront can be offset by a higher rate or annual fee within the first year.

If your current loan is on a fixed rate, you'll also face break costs if you refinance before the fixed period ends. These costs can run into thousands of dollars depending on how much time remains and how far rates have moved since you locked in. Before committing to a refinance, calculate whether the saving from a lower rate justifies the break cost and other fees. In many cases, waiting until the fixed period ends makes more financial sense unless you're refinancing to access equity or consolidate high-interest debt that's costing you more than the break fee.

Documentation Requirements Mirror Your First Loan

You'll provide much of the same paperwork you submitted when you first borrowed. That includes proof of income such as payslips or tax returns, bank statements covering at least three months, details of all assets and liabilities, and identification documents. Lenders also request a rates notice or recent utility bill to confirm the property address. If you're refinancing to access equity, you'll need to explain how you'll use the funds. Lenders apply stricter scrutiny if you're releasing equity for purposes they consider higher risk, such as investing in shares or funding a business, compared to renovating the property or buying another home.

Single-income borrowers should expect lenders to request more detailed expense verification than they might for dual-income households. Some lenders will manually review your bank statements to assess spending patterns, particularly if your income sits close to the threshold for the loan amount. This can add time to the approval process, especially if your statements show irregular spending or large one-off transactions that need explanation.

How Broker Support Changes the Process

A broker manages the documentation flow, coordinates with the lender and valuer, and identifies which lenders are likely to approve your application based on your current financial position. This matters more during refinancing than it does during a first home purchase because your circumstances have likely shifted since you first borrowed. A lender that was a strong fit three years ago may no longer suit your profile, or a lender you didn't consider initially may now have a product that aligns with where you're headed. Brokers also have access to rate structures and policy details that aren't published on lender websites, which can make the difference between approval and decline if your situation involves any complexity.

Call one of our team or book an appointment at a time that works for you.

Frequently Asked Questions