What Not to Do When Refinancing Investment Property

Refinancing an investment property isn't the same as refinancing your own home.

The wrong rate structure can cost you thousands in deductibility. The wrong loan features can lock you out of your equity when you need it most. And if you're coming off a fixed rate period, the default variable rate your lender moves you to is rarely the option that works hardest for your portfolio.

For investors in Perth, where property values have been climbing and rental yields remain strong, a loan health check on your investment property can reveal opportunities you didn't realise were sitting in front of you.

Why Refinance an Investment Property

You refinance an investment loan to release equity, reduce your interest rate, or access features that improve how the loan works for your tax position and cashflow. Consider a landlord who bought in Baldivis three years ago at $450,000 and is now sitting on a property valued closer to $550,000. That $100,000 in equity can fund a deposit on a second property, but only if the loan structure allows you to access it without selling.

Refinancing also matters when your fixed rate ends. Many investors locked in rates during the low-rate period and are now rolling onto variable rates that sit well above what's available elsewhere. The difference between staying on a 6.5% revert rate and refinancing to a 5.9% variable rate might be $3,000 a year on a $500,000 loan. That's $3,000 in deductible interest you're paying without getting anything back in return.

Accessing equity for your next investment is one thing. Accessing it in a way that keeps your deductions clean and your structure intact is another.

The Cost of Staying on a High Rate After Your Fixed Period Ends

When a fixed rate period ends, most lenders move you to their standard variable rate automatically. That rate is rarely the lowest they offer, and if you're not actively reviewing, you're likely paying more than you need to. For investment properties, every dollar of unnecessary interest is a dollar you could have claimed as a deduction somewhere else.

If your fixed rate expired in the past six months and you haven't reviewed what you're now paying, it's worth checking what rate you've landed on and what's available if you refinance to a lower rate. Even a 0.4% difference adds up quickly when the loan amount sits above $400,000.

Refinancing to Access Equity Without Selling

Releasing equity in your property lets you buy again without selling what you already own. The equity you've built through capital growth and loan repayments can be borrowed against to fund the deposit and costs for your next purchase. In Perth's northern suburbs, where median values have lifted across Ellenbrook, Alkimos, and Yanchep, many landlords are sitting on equity they didn't have two years ago.

A landlord with a $480,000 investment loan and a property now valued at $620,000 has roughly $140,000 in available equity at 80% LVR. Refinancing to access that equity means the new borrowing is secured against the investment property, and the interest on that additional amount is deductible if it's used to buy another investment.

The alternative is a cash out refinance where the released funds go toward renovations, debt consolidation, or other purposes. What you use the funds for determines how much of the interest you can claim, so the structure matters as much as the rate.

What to Look for Beyond the Interest Rate

A lower interest rate matters, but the features attached to the loan determine how much flexibility you actually have. An offset account linked to your investment loan lets you park rental income and reduce the interest charged without affecting your deductions. A redraw facility gives you access to extra repayments, but some lenders restrict how often you can redraw or charge fees each time you do.

If your goal is to build a portfolio, you want a loan that lets you access equity again in 18 months without needing to refinance from scratch. Some lenders will revalue your property and increase your limit based on the new value. Others require a full refinance application each time, which adds cost and time when you're ready to move.

For investors who plan to switch between fixed and variable rates depending on the market, check whether your lender lets you split the loan without splitting it across multiple accounts. A split rate structure should give you control without doubling your paperwork.

The Refinance Process for Investment Property in Perth

The refinance application starts with a property valuation. Most lenders will organise a desktop valuation or a kerbside inspection rather than a full internal valuation, which keeps the cost down and speeds up the process. If your property is in an area where sales data is strong, like Canning Vale or Joondalup, a desktop valuation usually comes back within a few days.

Once the valuation is done and your loan amount is confirmed, the lender will assess your income, existing debts, and the rental income from the property. Investment loans are serviceability-tested using the actual rent or 80% of market rent, whichever is lower. If you've recently increased the rent or the property was vacant during your last application, the new assessment might give you more borrowing capacity than before.

Settlement typically takes four to six weeks from approval. Your new lender pays out the old loan, and any equity release is deposited into your account once the refinance is complete. If you're refinancing to access equity for another purchase, timing the settlement to align with your next deposit deadline matters, so flag that early in the process.

Refinancing Investment Property While Renting Yourself

Many Perth investors still rent their own home while building a property portfolio. Refinancing your investment loan while you're a renter doesn't change the process, but it does mean your personal rent payments are part of the serviceability assessment. Lenders treat rent as an ongoing expense, so if your rent is high relative to your income, it can reduce how much you're able to borrow or release.

If you're planning to buy an investment property while renting, refinancing an existing investment to improve cashflow or access equity can make the next purchase more achievable. The rental income from your investment property works in your favour, but your own rent works against you. Reducing your interest rate or switching to interest-only repayments can improve the numbers enough to keep moving forward.

When Not to Refinance

Refinancing isn't always the right move. If you're within 12 months of selling the property, the cost of refinancing, including discharge fees and valuation costs, might outweigh the savings. If your current loan already has the features you need and the rate is within 0.2% of what's available elsewhere, the effort might not be worth it.

Break costs apply if you're still within a fixed rate period. These can run into the thousands, depending on how much time is left and how far rates have moved since you locked in. If your fixed rate doesn't end for another two years and rates haven't dropped, breaking early to refinance usually doesn't make financial sense. Wait until the fixed term ends, then move.

Call one of our team or book an appointment at a time that works for you. We'll review what you're currently paying, what's available, and whether refinancing your investment property puts you in a stronger position to keep building your portfolio in Perth.

Frequently Asked Questions