Refinancing an investment property makes financial sense when the after-fee saving over the time you’ll hold the loan is meaningful, or when a new loan gives you something the old one can’t, such as an offset account, a better interest-only term, or access to equity for your next purchase. With average investor variable rates at 6.89% and the lowest around 5.94% in October 2026, many investors on older loans are paying well above the market.
Step 1: Work out the rate saving
On a $600,000 investment loan over 30 years, principal and interest:
| Current rate | New rate | Monthly saving | Yearly saving |
|---|---|---|---|
| 6.89% (average investor variable) | 6.39% | $198 | $2,382 |
| 6.89% | 5.94% (lowest investor variable advertised) | $373 | $4,481 |
Source: Canstar investor rates as at 2 October 2026. Savings are our calculations and exclude fees. Because investment loan interest is generally tax deductible, your after-tax saving is smaller than the pre-tax figure. It’s still a real saving to your cash flow.
Step 2: Add up the costs
- Discharge fee from your current lender
- State government mortgage registration and discharge fees
- Application and valuation fees (often waived for refinancers)
- Break costs if you’re on a fixed rate
- Lenders mortgage insurance if the new loan is above 80% of the property’s value
Divide total costs by the monthly saving to find your break-even point. If you’ll hold the loan well past that point, the switch is worth considering. For the general version of this calculation, see refinance home loan rates.
Step 3: Try your current lender first
Ask your lender to match the competing rate before you apply elsewhere. Investors with good repayment history and a moderate LVR are often repriced on request. See how to negotiate a lower rate.
Refinancing to release equity
If your property has grown in value, refinancing can unlock equity for a deposit on another property.
Example: A property now valued at $900,000 with a $500,000 loan. Lenders typically lend up to 80% of value without LMI, which is $720,000. That leaves up to $220,000 of usable equity, subject to the lender’s assessment of whether you can afford the larger loan.
Things to get right:
- Set up a separate loan split for the released equity. Keep it apart from the original loan so the purpose of each borrowing stays clear.
- Use it only for investment purposes if you want it deductible. Equity drawn for personal spending is generally not deductible.
- Avoid cross-securing properties where possible, so each property and loan can be sold or refinanced on its own.
More on this in using equity to get a better rate.
Serviceability: can you still qualify?
Lenders assess investment loans at your new rate plus a 3 percentage point buffer set by APRA, and many shade rental income (counting only part of it) to allow for vacancies and costs. With rates higher in 2026, some investors who could borrow comfortably in 2024 now find it harder to pass. Check your position before you apply, so a declined application doesn’t sit on your credit file.
Interest-only terms
If your interest-only period is ending, refinancing can be a chance to restructure. Lenders limit how long interest-only can run, and a new IO period isn’t guaranteed. Compare what your repayments would be on principal and interest at a new lender against a new interest-only term, and think about which suits your long-term plan.
Does refinancing reset your loan term?
It can. If you refinance a loan with 22 years remaining onto a new 30-year term, your repayments drop, but you’ll pay interest for longer. If your goal is to save money, choose a term close to what you had left, or keep paying the old repayment amount.
Tax points to check
- Interest on the refinanced investment loan generally remains deductible if the money continues to be used for the investment.
- Borrowing expenses, such as establishment fees and valuation fees, over $100 are generally claimed over five years, or the loan term if shorter.
- Break costs can sometimes be deductible, depending on circumstances.
Confirm your situation with a registered tax agent. For other ways to trim costs, see how to cut investment loan costs and our guide to investor home loan rates.
Frequently asked questions
How do I work out if refinancing is worth it?
Add up all switching costs, including any break costs and LMI, then divide by the monthly saving at the new rate. The result is the number of months to break even. If you’ll keep the loan well beyond that, refinancing is likely worth it.
Can I refinance to release equity for another property?
Yes, if the lender values the property high enough and you pass serviceability on the larger loan. Most lenders allow borrowing up to 80% of the property’s value without LMI. Set up the released equity as a separate split so its purpose stays clear for tax.
Does refinancing reset my loan term?
Only if you choose a new full-length term. Ask for a term that matches what you had left, or keep paying your previous repayment amount to avoid paying interest for longer.
Sources
- Canstar, Average home loan interest rates, as at 2 October 2026
- APRA, Macroprudential policy settings, May 2026
- Australian Taxation Office, Interest expenses on rental properties
General information only. It does not consider your objectives, financial situation or needs and is not credit or tax advice.