Refinancing looks different depending on whether you're still employed in the same role you had when you first borrowed, or if your circumstances have shifted.
The core requirements haven't changed since you took out your original loan, but how lenders assess them might have. Your income needs to service the new loan amount, you need sufficient equity in your property, your credit file needs to be in reasonable shape, and the property needs to meet the lender's valuation standards. If any of those elements have deteriorated since you bought, you might not qualify with every lender, though you'll often still have options.
How Much Equity Do You Need to Refinance?
Most lenders require at least 20% equity in your property to refinance without paying lenders mortgage insurance. If you purchased in an area like Terrigal or Avoca Beach within the past few years and values have risen, you might have more equity than you realise. If you bought near the peak or your property hasn't moved much in value, you could still be sitting below that threshold.
Consider a household that bought in Wamberal three years ago with a 10% deposit. They paid LMI at the time and their loan amount was around $720,000 on a purchase price of $800,000. If that property is now worth $880,000 and they've reduced the loan to $700,000, they're sitting at just over 20% equity. They can now refinance without paying LMI again, which opens up more lender options and potentially lower rates. If the property had stayed flat at $800,000, they'd still be under 20% equity and would either need to pay LMI again or wait.
Equity requirements also shift if you want to access funds during the refinance. Releasing equity to buy an investment property or consolidate other debts usually means you need more than 20% remaining after the cash is drawn. Lenders typically cap you at 80% of the property value for a standard refinance, though some will go higher if you're willing to cover the insurance cost.
Income and Employment Assessment for Refinance Applications
Lenders assess your current income, not what you were earning when you first borrowed. If you've changed jobs, moved from full-time to part-time, or started receiving other income like rental payments, the lender will verify it all.
Self-employed borrowers often find this stage more involved. Where a PAYG employee might only need recent payslips and a letter from their employer, someone running their own business will usually need two years of tax returns and often a letter from their accountant. We regularly see scenarios where someone was employed when they purchased but has since started their own venture. The refinance application becomes more documentation-heavy, but it's still workable if the income is there and consistent.
If your household income has dropped since you first borrowed, serviceability can become tight. Lenders use current interest rates to test whether you can afford the loan, and those rates are often higher than what you're actually paying. A reduction in income combined with higher assessment rates can mean you don't qualify for the full loan amount you currently owe, even though you've been meeting repayments without issue. In those situations, a loan health check can help identify which lenders assess serviceability more favourably for your circumstances.
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What Lenders Look for in Your Credit File
Your credit file records every credit application, every repayment default, and every account you've opened or closed. When you apply to refinance, the lender will pull this file and look for patterns.
Missed repayments on your current loan, defaults on other debts, or multiple recent credit applications can all affect your eligibility. A single missed payment from two years ago won't necessarily disqualify you, but several recent ones might. Defaults over $500 stay on your file for five years, and some lenders won't approve a refinance if you have any unpaid defaults, regardless of the amount.
If you've been managing multiple debts alongside your mortgage and want to consolidate into a single loan, the refinance application will factor in those existing commitments. You'll need enough equity and income to absorb those balances into your home loan while still meeting serviceability requirements. Consolidation can improve cashflow by reducing your total monthly repayments, but it extends the repayment term on what were shorter-term debts, so the total interest cost over time can be higher.
Property Valuation and Lender Appetite
The lender will either conduct a desktop valuation or send someone to inspect your property. The outcome determines how much equity you actually have, which affects everything else.
Properties in areas with consistent transaction volumes, like Erina or Woy Woy, tend to receive valuations that align closely with recent sales. If you're in a smaller pocket with fewer comparable sales, or if your property has unique features, the valuation might come in lower than expected. Lenders are conservative, and if the valuer flags concerns about the condition of the property or recent market softness, it can reduce the amount you're able to borrow.
Some lenders also have restrictions on certain property types. If you own a unit in a block with commercial tenancies on the ground floor, or a property on a large rural block, not every lender will refinance it. Location matters too. Central Coast properties are generally well-regarded by most lenders, but if you're refinancing a property in a smaller regional town or a high-density development, your options might narrow.
What Happens When You're Coming Off a Fixed Rate
If your fixed rate period is ending and you're moving to a variable rate that's significantly higher, refinancing can lock in a lower rate with a different lender. The eligibility requirements are the same, but the timing matters. You want to start the refinance process at least eight weeks before your fixed term ends to avoid rolling onto a higher variable rate while your application is still being assessed.
As an example, someone with a $650,000 loan fixed at 2.1% is now facing a variable rate above 6% with their current lender. They've been in the same job for six years, the property in Bateau Bay has increased in value, and they have no other debts. The refinance application should be straightforward, but if they wait until the fixed term has already expired, they'll be paying the higher rate for at least a month or two while the new loan settles. Starting early means you can time the settlement to coincide with the expiry, or shortly after.
When Your Circumstances Don't Fit Standard Criteria
Not everyone fits neatly into a lender's standard assessment model. If you're on a visa, recently returned to work after parental leave, or earning income from multiple sources including overtime or bonuses, some lenders will be more flexible than others.
Visa holders with permanent residency often have no issues, but those on temporary visas might find their options limited to a smaller group of lenders. Income that includes bonuses or commissions is typically only counted if you've been receiving it consistently for at least 12 months, and even then, some lenders will only factor in a portion of it.
If you've recently returned to work after time off, some lenders will accept a letter from your employer confirming your ongoing employment, while others want to see payslips covering several months. The assessment varies by lender, which is where working with someone who knows which policies apply becomes useful.
If you're thinking about refinancing but you're not sure whether your circumstances qualify, call one of our team or book an appointment at a time that works for you. We'll look at what you're working with and let you know where you stand before you submit anything formal.
Frequently Asked Questions
How much equity do I need to refinance without paying lenders mortgage insurance?
Most lenders require at least 20% equity in your property to refinance without LMI. If your property has increased in value since you bought or you've paid down your loan, you might have more equity than you think, even if you originally borrowed with a smaller deposit.
Will changing jobs affect my ability to refinance?
Changing jobs doesn't automatically disqualify you, but lenders will assess your current income and employment stability. If you've moved to a similar role with steady income, it's usually fine, but if you've recently started a new job or become self-employed, you may need to provide additional documentation or wait until you have a longer employment history.
Can I refinance if I have a default on my credit file?
It depends on the type, amount, and timing of the default. Some lenders won't approve a refinance if you have any unpaid defaults, while others may still consider your application if the default is small, old, or has been paid. A mortgage broker can identify which lenders are more flexible with credit history.
What happens if my property valuation comes in lower than expected?
A lower valuation reduces your available equity, which can affect how much you're able to borrow or whether you'll need to pay lenders mortgage insurance. If the valuation is significantly lower than recent sales in your area, you may be able to challenge it by providing comparable sales evidence, though outcomes vary.
How long does the refinance application process take?
The process typically takes four to eight weeks from application to settlement, depending on the lender and how quickly you can provide required documents. If you're coming off a fixed rate, starting at least eight weeks before your term ends gives you time to settle the new loan without paying higher rates in the interim.
