Refinancing
Refinancing an investment property: what to check before you switch
7 min read · By Daniel Lagden · 6 November 2026
The short version
- A rate cut is only part of the picture. Loan structure, interest only periods and how your properties are secured matter as much.
- Usable equity is generally up to 80 per cent of the property's value less what you owe. The lender's valuation decides the number, not your estimate.
- Whether interest is deductible generally depends on what the borrowed money is used for, so keep purposes separate and ask your accountant.
- Work out the break even before you switch: total switching costs divided by the monthly saving.
Investors usually refinance for one of three reasons: a lower rate, access to equity for the next purchase, or a cleaner structure. The rate gets the attention, but on an investment loan the structure often decides how much the switch is really worth. This guide covers what to check, with worked examples so you can see how the numbers move.
Quick summary: ask your current lender first, then check the costs, the structure and the usable equity before you move. Switching only makes sense if the saving or the structure benefit outlasts the cost of getting there.
What is usable equity and how do you work it out?
Lenders generally allow you to borrow up to a set percentage of a property's value, with 80 per cent the common starting point. Usable equity is that figure less your current loan. It is an estimate until a lender values the property, and the lender's valuation, not yours or a recent sale down the street, is the one that counts.
| Item | Amount |
|---|---|
| Property value (illustrative) | $1,000,000 |
| 80 per cent of the value | $800,000 |
| Less the current loan | $600,000 |
| Usable equity before lender checks | $200,000 |
That $200,000 is a ceiling, not an offer. The lender still has to assess that you can afford the larger loan, and lenders usually count only part of your rental income and test your repayments at a higher rate than the one you actually pay.
Interest only or principal and interest?
Many investors hold interest only loans, and the interest only period is commonly set for a fixed number of years before the loan reverts to principal and interest. When it reverts, the repayment can rise sharply, which often prompts investors to refinance. Check when yours ends and what the repayment becomes. A refinance is also the time to decide whether interest only still suits your plan. A new interest only period is not automatic: the lender has to approve it, and it usually assesses your repayments over the shorter principal and interest term that remains, which can reduce what you can borrow.
How your properties are secured
Some investors have one loan secured by two properties, which ties them together. If more than one property secures the same loan or loans, the lender holds more control, and releasing one property later can mean refinancing or paying down debt. Refinancing is a natural point to untangle that, so each property sits under its own loan. It takes planning, but it gives you room to sell or borrow against one property without disturbing the rest.
Interest and tax
Whether the interest on a loan is deductible generally depends on what the borrowed money is used for, not on which property secures it. If you release equity from an investment property to fund personal spending, that part of the loan is generally not deductible. Many borrowers keep different purposes in separate loans or separate parts of one loan (called splits) so the records are clear. We are not tax advisers, so have your accountant confirm how any particular structure works before you proceed.
Does the switch pay for itself?
Take a $600,000 interest only investment loan. Moving from 6.50 per cent to 6.10 per cent cuts the interest from $3,250 to $3,050 a month, which is $200 a month or $2,400 a year. If switching costs $1,500, the break even is 7.5 months. The figures are illustrative and assume the rate does not change. The rates are hypothetical, not rates offered by any lender, and not comparison rates. Because investment interest is usually deductible, your after tax saving will be smaller than this, so ask your accountant how it applies to you.
Remember that the discharge fee, the application fee, any valuation fee, government registration fees and any break fee on a fixed rate loan are all part of the cost. If your equity in the property is under 20 per cent, a new lender may also charge lenders mortgage insurance, which can outweigh the saving.
When switching may not be worth it
- You are on a fixed rate and the break fee is large.
- You plan to sell soon, before you recover the costs.
- Your income or borrowing position has changed, and a new lender may assess you differently from the one that approved the original loan.
- The property is a type that lenders treat differently, such as a rooming house. Our guide to refinancing a rooming house explains what changes.
General information only, current as at November 2026. Lender policy, rates, fees and break costs vary and change, and the figures here are illustrative, not a quote or a market benchmark. This does not take your circumstances into account and is not tax advice. Confirm your numbers with your lender, a credit professional and your accountant.
Frequently asked questions
How much equity can I use to refinance an investment property?
Generally up to 80 per cent of the property's value less your current loan, though a lender can set a different limit and its own valuation decides the figure. You also need to show you can afford the larger loan.
Is it worth refinancing an interest only investment loan?
It can be, particularly when the interest only period is about to end or your rate has fallen behind the market. Work out the break even first: total switching costs divided by the monthly saving.
Does refinancing an investment property trigger capital gains tax?
Refinancing generally does not change who owns the property, so on its own it is not usually treated as a sale. Any change in ownership can have tax consequences, so check with your accountant first.
Can I refinance and pull equity out for the next purchase?
Often yes. Many investors refinance and release equity as a deposit for the next property. The lender assesses the larger debt, so your income, your rent and your existing commitments all count, and lenders may ask what the money is for, particularly for larger amounts.
Should I ask my current lender before switching?
Yes. Tell your lender you are considering moving and ask for a better rate. It costs a phone call and gives you a benchmark. Our guide on refinancing or asking your bank for a better rate compares the two with figures.
Thinking of refinancing an investment loan?
Send us the properties, the loans and what you want from the switch. We will tell you honestly whether it stacks up after the costs.
Review my investment loansGeneral information only. This article does not take into account your objectives, financial situation or needs, and is not credit assistance or financial advice.
