What Are the Eligibility Requirements for Refinancing?

What Lenders Look for When You Refinance

Lenders assess your income, expenses, credit history, and property value when you refinance. The process mirrors a new home loan application, though you already own the property.

Your current financial position matters more than what you qualified for originally. A couple who bought three years ago might have added childcare costs, changed jobs, or picked up a car loan since then. Lenders assess your situation today, not what it looked like when you first borrowed. Income verification typically requires recent payslips, tax returns if you're self-employed, and rental income statements if you own investment properties. Your expenses include everything from school fees to subscription services, and lenders apply a buffer to your interest rate to ensure you can manage repayments if rates rise.

Consider a Queensland couple who purchased in 2022 with two incomes and minimal expenses. By the time their fixed rate expired, they had a second child in daycare and one partner working reduced hours. Their household income dropped while expenses climbed. When they approached their existing lender to refinance, the bank couldn't approve the same loan amount under current serviceability rules. Working with a broker, they explored lenders who assessed childcare differently and found one that treated the temporary expense as reducing over time. They refinanced successfully and accessed a lower rate than their fixed period was reverting to.

Does Your Credit File Affect Refinancing Approval?

Your credit file directly impacts whether lenders approve your refinance and what rate they offer. Lenders review your repayment history, outstanding debts, and any missed payments or defaults.

A strong credit file can open up options across multiple lenders, while late payments or defaults might limit you to specialist lenders or higher rates. Even small missed payments on a phone bill or utility account can appear on your credit report and influence a lender's decision. If you've applied for multiple credit products recently, that also shows up and may concern lenders about your financial stability. Before you apply to refinance, it's worth checking your credit file through a reporting agency to see what lenders will see. If there are errors, you can dispute them before you lodge your application.

Most lenders want to see at least three months of consistent repayment history on your current mortgage before they'll consider refinancing you. If you've missed payments in the past six months, that can delay approval or require additional explanation. Some lenders are more forgiving than others, particularly if the missed payment was a one-off and you've since maintained a solid record. This is where a loan health check helps, as it allows you to understand your position before you formally apply.

How Much Equity Do You Need to Refinance?

Most lenders require at least 20% equity in your property to refinance without paying lenders mortgage insurance. Equity is the difference between your property's current value and what you owe on the loan.

If your property has increased in value since you purchased, you may have built equity even if you haven't paid down much of the loan. A property valued at $600,000 with a loan balance of $450,000 gives you $150,000 in equity, or 25%. That's enough to refinance without additional insurance costs. If your equity sits below 20%, you can still refinance, but you'll likely pay lenders mortgage insurance, which adds to your upfront costs. Some lenders allow you to refinance with as little as 10% equity if your repayment history is strong and your income is stable.

Property valuations are critical during refinancing. Lenders typically arrange a desktop valuation or a kerbside assessment rather than a full inspection. If the valuation comes in lower than expected, your equity calculation changes and you may need to adjust your loan amount or provide a larger deposit to meet the lender's requirements.

Can You Refinance If You're Self-Employed?

Self-employed borrowers can absolutely refinance, though lenders usually require two years of tax returns and financials to verify income. Some lenders accept one year of returns if your income is strong and consistent.

If you've recently transitioned from employment to self-employment, this can complicate the process. Lenders prefer to see a consistent income pattern, and a recent change may mean waiting until you have more financial history in your business. For couples where one partner is employed and the other self-employed, lenders assess the combined income but may weight the employed income more heavily when calculating serviceability. In our experience, self-employed applicants benefit from working with a broker who knows which lenders have more flexible policies around income verification and business structures.

What Happens If You're Coming Off a Fixed Rate?

When your fixed rate period ends, your loan typically reverts to a variable rate that may be significantly higher than what you were paying. Refinancing before the expiry allows you to lock in a new rate and potentially access features your current loan doesn't offer.

Most lenders let you apply to refinance up to six months before your fixed term ends, which gives you time to compare options without rushing the decision. If you're within four months of your fixed rate expiry, that's usually the ideal window to start the process. You can settle the new loan just as the fixed period ends and avoid any break costs. If you refinance early and your fixed rate hasn't expired, your current lender may charge break costs based on the difference between your fixed rate and current market rates. Those costs can be substantial, so it's worth calculating whether the savings from refinancing outweigh the fee.

Does Your Employment Type Matter for Refinancing?

Lenders treat casual, part-time, permanent, and contract employment differently when assessing your application. Permanent full-time employment is typically the most straightforward, but other employment types are still acceptable with the right documentation.

Casual employees usually need to show at least six to twelve months of consistent hours with the same employer. Lenders often apply a discount to casual income to account for variability, so your borrowing capacity might be lower than a permanent employee earning the same amount. Contract workers need to demonstrate ongoing work, either through a current contract with a renewal option or a history of back-to-back contracts in the same field. Some lenders are more flexible than others, particularly for professionals in industries where contract work is the norm, such as IT or healthcare.

For couples where one partner works casually and the other is on a permanent contract, lenders typically assess the combined income but apply different weighting to each. This can still provide enough serviceability to refinance, particularly if the permanent income covers the majority of the repayment.

How Do Lenders Assess Your Expenses?

Lenders calculate your expenses using a combination of your declared costs and a benchmark figure called the Household Expenditure Measure. They take whichever figure is higher to ensure you can manage repayments even if your spending increases.

Your declared expenses include rent, groceries, utilities, insurance, childcare, school fees, and any other regular commitments. If your actual spending is lower than the lender's benchmark, they'll still use the benchmark figure to assess serviceability. This can be frustrating for borrowers who live frugally, but it's designed to protect you from taking on a loan you can't afford if circumstances change. Credit card limits also factor into the calculation, even if you pay the balance in full each month. Lenders assume you could max out the card at any time, so a high limit reduces your borrowing capacity even if you rarely use it. Reducing your credit limit or closing unused cards before you apply can improve your serviceability.

Can You Refinance to Access Equity for Other Purposes?

Refinancing lets you access equity in your property for purposes like renovations, debt consolidation, or purchasing an investment property. Lenders assess the purpose of the funds and your ability to service the higher loan amount.

If you're accessing equity to buy an investment property, lenders will include the rental income from that property in their serviceability calculation, though they typically discount it by 20% to account for vacancy periods and maintenance costs. If you're consolidating debt, lenders want to see that rolling credit cards or car loans into your mortgage will genuinely improve your financial position, not just extend the repayment term unnecessarily. Some lenders cap how much equity you can access depending on the purpose, particularly if the funds aren't being used for property-related expenses.

What Documents Do You Need to Refinance?

You'll need to provide proof of income, identification, recent mortgage statements, and details of any other debts or financial commitments. The exact documents depend on your employment type and the lender's requirements.

For employed borrowers, that usually means two recent payslips and a letter from your employer confirming your position. Self-employed applicants provide tax returns, business financials, and sometimes a letter from an accountant. Lenders also ask for statements from any accounts linked to your current mortgage, such as offset accounts or redraw facilities, to verify your savings buffer and repayment history. If you're refinancing to access equity, you may need quotes or contracts for the intended purpose, such as renovation quotes or a contract of sale for an investment property.

Gathering these documents before you start the application can speed up the process significantly. A broker can give you a checklist tailored to your situation so you're not scrambling to find paperwork halfway through.

When Should You Consider Refinancing?

Refinancing makes sense when you can access a lower rate, improve your loan features, or release equity for another purpose. It's worth reviewing your loan whenever your financial situation changes or your fixed term ends.

Sometimes the savings from a lower rate are offset by refinancing costs like application fees, valuation fees, and discharge fees from your current lender. If the annual saving outweighs those costs within the first year or two, refinancing is usually worthwhile. If your current loan lacks features like an offset account or the ability to make extra repayments, refinancing to a loan with those options can improve your cashflow and help you pay off the loan faster. A loan health check can help you weigh up whether refinancing fits your current goals or whether staying put makes more sense.

Call one of our team or book an appointment at a time that works for you to discuss your refinancing options and see what you qualify for.