Login
To refinance or wait? Why a cheaper rate could cost investors their next property
Investors rushing to refinance before another rate hike could secure cheaper repayments but sacrifice hundreds of thousands of dollars in borrowing power if they choose the wrong lender. Here is what to know before refinancing.
Property investors preparing for another potential rate hike could be making their next purchase harder by refinancing for a cheaper rate.
While rising rates have pushed more borrowers to review their loans, switching lenders could leave investors worse off if the new deal restricts their ability to access equity or borrow for another property.
Finni Mortgages principal Eva Loisance said that while rising rates were prompting borrowers to review their loans, switching lenders could undermine investors’ ability to access equity or finance their next purchase.
“The bigger risk for many investors is not refinancing too early. It’s waiting six or 12 months while paying a higher interest rate than necessary, losing equity access opportunities if property values soften, and experiencing reduced servicing capacity if rates rise further,” Loisance told SPI.
Recent data by Loan Market Group found that refinancing accounted for a record 57 per cent of September lodgements, as declining new lending and a deepening investor retreat reshaped its application pipeline.
Separately, Finder data showed 462,000 mortgage holders planned to refinance in the next 12 months, highlighting the scale of borrowers reassessing their loans.
Despite the surge in refinancing, Loisance said securing a lower rate wouldn’t automatically put investors in a stronger position, particularly if they planned another acquisition.
“A lender that’s 0.20 per cent dearer but provides an extra $300,000–$500,000 of borrowing power may be the superior long-term choice.”
Here is what to know before refinancing.
The loyalty tax adding thousands to investor debt
While refinancing could erode borrowing power, Loisance said sticking with the same lender for years without reviewing loan terms could also cost investors tens of thousands of dollars in interest.
She said a 0.50 percentage point difference on a $500,000 loan over 30 years could add more than $58,000 in interest over the life of the loan.
Free investor loan check
Better property decisions start with smarter lending.
A free 15-minute finance check for property investors.
What are your lending goals?
Choose a goal to request a callback.
Ready to talk?
Book a 15-minute call →Finni Pty Ltd · Australian Credit Licence 384324 · Privacy
For investors carrying between $800,000 and $1.5 million in debt across multiple properties, she said the potential cost could be substantially higher, particularly where interest-only lending was involved.
Similarly, she said a rate more than 0.50 to 0.75 percentage points above comparable offers, no pricing review in more than two years, or difficulty releasing equity could signal that an investor’s existing lender was no longer competitive.
Yet before switching lenders, Loisance said investors needed to assess more than the headline rate when comparing offers.
“Many investors assume they’re comparing interest rates when they should actually be comparing total portfolio outcomes.”
A cheaper loan could improve cash flow but could still restrict future borrowing if the lender applied tighter servicing policies or made equity releases harder.
The refinance decision that could derail your next purchase
While refinancing could release equity, improve cash flow, and create a more suitable loan structure, Loisance said the outcome would depend on whether the lender’s policies aligned with investors’ next move.
She said that before changing lenders, investors should assess how a refinance would affect their plans over the next three to five years, rather than focusing solely on immediate savings.
“The most successful investors understand that the real value of refinancing lies not just in reducing repayments but in improving overall financial flexibility, unlocking equity and positioning themselves for their next investment.”
She said that a lender offering a sharper rate or cashback could prove a poor choice if its servicing calculations limited an investor’s borrowing power or its equity-release policies made another acquisition harder to fund.
“Borrowing capacity is a growth asset. Don’t sell it for a slightly cheaper interest rate.”
When staying with your lender makes more sense
Despite the potential savings, Loisance said that refinancing would not always deliver a better outcome.
She said investors whose existing lenders offer competitive pricing could be better off negotiating a rate review rather than switching.
Additionally, Loisance said investors should weigh the costs and time involved in refinancing against the potential savings.
She said that break fees, losing valuable loan features, reassessments of income and expenses and delays to an upcoming purchase could outweigh the benefits.
“Investors planning to buy again soon should consider whether changing lenders could disrupt their approval or acquisition timeline.”
“Rather than asking, ‘Can I get a cheaper loan?’, investors should be asking, ‘Which lender will put me in the strongest position to achieve my goals over the next three to five years?’”
Want to see more stories from trusted news sources?
Make Smart Property Investment a preferred news source on Google.
Click here to add Smart Property Investment as a preferred news source.
