Understanding the Basics of Refinancing Approval

Refinancing approval follows the same core lending criteria as your original mortgage, but lenders look at your current situation rather than when you first borrowed.

The approval process checks your income, expenses, existing debts, and property value against the loan amount you want. Lenders assess whether you can service the new loan at today's rates and whether the property provides enough security. If you're on shift work or earn penalty rates, that income gets treated the same way it did when you first applied, though the lender doing your refinance might assess it differently to your current lender.

Income Verification Works the Same Way

Lenders need recent payslips, usually your two most recent, plus a letter of employment or PAYG summary. Your base salary gets counted at 100%, while penalty rates and shift allowances are typically assessed at 80% depending on the lender. Some lenders recognise rostered overtime for police officers at a higher percentage if it's been consistent for 12 months or more.

If you've changed roles or stations since your original loan, expect questions about your current position and employment status. A move from general duties to a specialist unit won't cause issues as long as your employment is ongoing. Contract or probationary roles can complicate things, though permanent positions with the same employer generally sail through even if your duties have changed.

Property Valuation Can Make or Break Approval

Your lender orders a valuation to confirm your property's current worth. They need to know the loan-to-value ratio, which determines whether you'll pay lenders mortgage insurance on the new loan. Most lenders use desktop valuations for straightforward refinances, where a valuer assesses your property remotely using recent sales data and council records.

Consider someone refinancing a unit they bought three years ago. The original purchase price was within the suburb's median range at the time. If similar units in the complex have sold recently for less than expected, the valuation might come in under the amount needed to avoid LMI on the new loan. That doesn't kill the application, but it changes the numbers. The borrower either pays the insurance premium, which gets added to the loan, or brings the shortfall as cash to settlement. We see this occasionally when someone bought at a market peak and values have softened since.

Lenders Recalculate Your Borrowing Capacity

Your original loan got approved based on rates and living expenses from whenever you first borrowed. Lenders now assess your capacity using current interest rates and updated expense benchmarks. The household expense measure has increased substantially in recent years, which means your borrowing capacity might be lower now even if your income has increased.

Debt makes a bigger impact than most people expect. Personal loans, car loans, and credit card limits all reduce what you can borrow, even if you're not using the full limit. A $10,000 credit card limit might reduce your borrowing capacity by $30,000 or more depending on the lender's assessment rate. Paying down or closing those accounts before you apply for refinancing can materially improve your position.

The Application Itself Takes Less Time Than You Think

Once you've gathered your documents, the actual application takes about 20 to 30 minutes if you're doing it during a call with your broker. You'll need details about your current mortgage, the property, your income, and your expenses. Your broker handles the rest, including chasing the valuation and liaising with the lender's assessment team.

Approval timeframes sit between three days and two weeks for most straightforward refinances. Delays usually come from waiting on valuations or missing documents rather than the actual credit assessment. Lenders prioritise refinances differently, some treat them as faster turnarounds than purchase loans because there's no vendor timeline to meet, while others batch-process them weekly.

Why Your Current Lender Might Not Match What You've Been Offered

Some lenders will try to retain you by matching a competitor's rate when you mention refinancing. They might offer this without putting you through a full credit assessment. That's because you're already on their books and they'd rather keep you at a lower margin than lose you entirely.

But a retention offer only addresses rate. It doesn't give you offset accounts if you don't have them, or redraw if your loan doesn't allow it, or the ability to split between fixed and variable. If your goal is accessing equity for an investment property or renovation, your current lender still needs to formally assess that as a new application. At that point you're going through the same approval process as refinancing to a different lender, except you've lost negotiating leverage by showing your hand early.

Fixed Rate Expiry Doesn't Change the Approval Process

If your fixed rate period is ending and you want to refinance rather than revert to your lender's variable rate, you're assessed the same way as any other refinance. The timing matters though. Lenders won't let you dodge break costs by applying to refinance two months before your fixed term ends and settling the day after. They'll process the application, but settlement can't occur until the fixed period expires unless you're willing to pay the exit fee.

You can usually start the application around 90 days out and time it so everything's approved and ready to settle within a week or two of your fixed term ending. That means you're only on your lender's revert rate for a few days rather than months while you sort out a refinance.

Documents Are the Same but Current Versions Matter

You'll provide the same paperwork you gave when you first borrowed, payslips, bank statements, ID, and employment verification, but lenders want current versions. A bank statement from two months ago won't work. Most lenders want statements covering the most recent three months, and they need to show today's date within 30 to 60 days depending on the lender.

If you've recently refinanced or taken out another loan, lenders want to see that on your credit file and in your liabilities. Forgetting to mention a car loan you took out six months ago will surface during the credit check and cause delays while the lender asks for an explanation and updated documents. Just disclose everything up front.

Refinancing approval is less about surprises and more about whether your current numbers stack up under current lending policy. The process runs parallel to a new loan application, just without the purchase contract and cooling-off period.

If you're weighing up whether refinancing makes sense given your current situation, or you're coming up to the end of a fixed term and want to know what your options look like, call one of our team or book an appointment at a time that works for you.

Frequently Asked Questions