How to Refinance an Investment Property in Australia

Investment property loans tend to attract higher interest rates than owner-occupied loans — and they're often interest-only, which means the balance doesn't reduce over time. Refinancing can be a powerful way to improve your cash flow, access equity, or consolidate your portfolio.

But investment property refinancing comes with its own considerations. Here's what you need to know.

Why Investment Loans Have Higher Rates

Lenders charge more for investment loans because the regulatory framework (APRA) requires them to hold more capital against investor lending. This typically adds 0.2–0.5% to the rate.

That said, the spread between investment and owner-occupied rates varies between lenders — and it's worth shopping around. Some lenders price investment loans very competitively.

Interest-Only vs Principal & Interest

Many investors choose interest-only (IO) loans to minimise repayments and maximise deductibility. IO terms are typically limited to 5 years, after which the loan reverts to P&I — often at a higher rate.

Refinancing can reset your IO period with a new lender — but this is harder to do than it used to be. Lenders now require you to demonstrate genuine serviceability at the P&I rate before approving an IO extension.

Accessing Equity in an Investment Property

Refinancing an investment property to access equity (for renovation, another purchase, or debt consolidation) works similarly to an owner-occupied property — but lenders apply the investment property LVR policy, which may be more conservative.

• Most lenders cap investment lending at 80% LVR without LMI
• Some lenders will go to 90% with LMI for investment purposes
• Serviceability is assessed at standard assessment rates (often 6.5%+ test rate)

Tax Implications of Refinancing

Refinancing an investment property can affect the tax deductibility of your loan interest. The key rule: interest is deductible if the purpose of the borrowing is income-producing.

If you refinance and access equity for personal use (e.g. buying a car), that portion of the loan is no longer deductible. A clear split between deductible and non-deductible debt is essential — your accountant should guide this.

Discharge and Switching Costs

Common costs when refinancing an investment property:

• Discharge fee from existing lender: $150–$400
• New lender application/settlement fee: $300–$700
• Break costs if on fixed rate (can be significant)
• Valuation fee: $0–$300 (some lenders waive this)
• LMI if borrowing above 80% LVR

Most lenders offer cashback refinance deals ($2,000–$4,000) for investment properties as well as owner-occupied — this can offset switching costs entirely.

When Does Refinancing Make Sense?

Consider refinancing your investment loan if:

• Your current rate is 0.3%+ above current market rates
• Your IO period is expiring and you want to reset it
• You want to access equity for another purchase
• Your portfolio has grown and you want a lender that specialises in investor lending
• You're consolidating multiple investment loans under one lender for simplicity

Portfolio vs Individual Property Refinancing

If you have multiple investment properties, you can refinance them separately (maximising competition between lenders) or together (simplifying management). Cross-collateralisation — using multiple properties as security for one loan — is generally not recommended as it reduces flexibility.

Bottom Line

Investment property refinancing is worth reviewing every 1–2 years, especially when your IO period is due to expire or when the market rate drops significantly below your current rate. A broker who works with investors can handle all the modelling for you.