How to refinance investment properties in Burwood

Why refinance an investment property loan

Refinancing an investment property means moving your existing loan to a new lender or renegotiating the terms with your current one to reduce costs, release equity, or access improved loan features. Investors typically refinance to lower their interest rate, which directly improves cashflow on rental properties, or to access equity built up in the property for their next acquisition.

Burwood investors often hold properties in the suburb's unit market, where values have shifted considerably over recent years. If you purchased or last refinanced several years ago, the gap between your loan balance and current property valuation may have widened enough to support borrowing for another deposit. Similarly, if your fixed rate period is ending and you are reverting to a higher variable rate, refinancing can lock in a lower rate or switch you to a product with offset features that reduce interest on rental income held in the account.

Consider an investor who purchased a two-bedroom unit near Burwood Brickworks in the early stages of the precinct's redevelopment. They secured a three-year fixed rate at the time, which has now expired. Their loan has reverted to a variable rate that sits well above current refinance rates available to investment borrowers. By refinancing, they moved to a lender offering a lower variable rate and added an offset account, which they use to park rental income and reduce the interest charged each month. The rate difference alone reduced their monthly repayment by several hundred dollars, and the offset feature improved their tax position by lowering deductible interest without requiring extra repayments that would reduce the deductible loan balance.

When to consider refinancing your investment loan

You should review your investment loan when your fixed rate period ends, when you have built sufficient equity to support another purchase, or when your current loan no longer suits your investment strategy. A loan health check at least once every two years ensures you are not paying more than necessary or missing features that improve cashflow.

If you are coming off a fixed rate, your lender will typically revert you to their standard variable rate, which is often higher than the rates offered to new customers. This is a common trigger for refinancing. Investors in Burwood with properties near the Burwood Highway corridor or close to Deakin University may also find that property values have risen enough to support equity release for a deposit on a second property. Refinancing allows you to access that equity without selling, while also reviewing whether your current rate and loan structure still align with your portfolio goals.

How much equity can you access when refinancing

Most lenders allow you to borrow up to 80% of your property's current value when refinancing an investment loan without requiring lenders mortgage insurance. If your property is valued higher than when you first purchased, and your loan balance has reduced, the difference between 80% of the new valuation and your current loan balance represents the equity you can access.

As an example, an investor holds a unit in Burwood currently valued at the suburb's median for two-bedroom apartments. Their loan balance is lower than it was at purchase due to regular repayments over several years. Refinancing at 80% of the current valuation allows them to borrow enough to cover the deposit and purchase costs for a second investment property in a nearby suburb, while keeping the loan-to-value ratio within standard policy limits. The released equity is added to the loan amount, so repayments increase, but the rental income from the second property is expected to cover most of the additional cost.

If you need to borrow above 80%, lenders mortgage insurance applies, which increases the upfront cost of refinancing. Some lenders also cap equity release for investment purposes at lower ratios depending on your overall borrowing position and the number of properties you hold. A refinancing review with a broker clarifies how much you can access based on your current property valuation and loan structure.

Fixed or variable rate when refinancing an investment property

Investment borrowers refinancing now need to decide whether to fix, stay variable, or split the loan across both. A variable rate gives you flexibility to make extra repayments, access redraw or offset features, and adjust your loan structure without break costs. A fixed rate provides certainty over repayments for a set period, which can be useful if you prefer predictable cashflow or expect rates to rise.

Many Burwood investors choose a split structure, fixing a portion of the loan to lock in a known repayment and leaving the remainder on a variable rate with an offset account. This allows them to park rental income in the offset to reduce interest on the variable portion, while still benefiting from rate protection on the fixed portion. The split ratio depends on your risk tolerance and whether you plan to make additional repayments or access equity again in the near term.

If your fixed rate period is ending and you are moving to a variable product, compare whether fixing again makes sense based on current rates and your investment timeline. Fixing can sometimes result in a higher rate than the current variable offering, so the decision should reflect your cash flow needs and rate outlook rather than defaulting to one or the other.

Refinancing to consolidate debt into your investment loan

Some investors refinance to consolidate non-deductible debt, such as credit cards or car loans, into their investment mortgage. This can lower the overall interest rate on that debt and simplify repayments, but it also converts short-term debt into a loan secured against property and repaid over a much longer term.

Consolidating debt into an investment loan reduces your serviceability for future borrowing, as the total loan amount increases. Lenders assess your ability to service the full loan balance, including any consolidated debt, when calculating how much you can borrow for your next property. If your goal is to release equity for another investment in the short term, consolidating other debts may limit how much equity you can access or affect your approval.

Debt consolidation makes sense when the interest saving outweighs the longer repayment term and when you do not plan to borrow again soon. If you are holding the property long term and want to reduce monthly outgoings, consolidating high-interest debt can improve cashflow. However, if your focus is building a portfolio, keeping the investment loan separate and paying down non-deductible debt independently usually leaves you in a stronger position for the next purchase.

The refinance application process for investment properties

Refinancing an investment property follows a similar process to a standard home loan refinance, but lenders place more weight on rental income, serviceability across multiple properties, and the loan-to-value ratio. You will need to provide recent rental statements or a lease agreement, your most recent tax return showing rental income and deductions, and evidence of your current loan balance and repayment history.

The lender will arrange a property valuation to confirm the current value of your Burwood property. Valuation outcomes can vary depending on recent sales in the area and the specific location of your property relative to Burwood One, the train station, or the Brickworks precinct. If the valuation comes in lower than expected, the amount you can borrow or release as equity will reduce accordingly.

Once the application is submitted, most lenders take between two and four weeks to assess and approve the loan, depending on how quickly you provide supporting documents and whether any additional information is requested. Settlement typically occurs within four to six weeks of approval, though this can be shorter if you are refinancing with your current lender or if no equity release is involved. Working with a mortgage broker familiar with investment lending can reduce delays by ensuring the application is structured correctly from the start.

Costs involved in refinancing an investment property

Refinancing involves discharge fees from your current lender, application or establishment fees with the new lender, valuation costs, and legal fees for settlement. Discharge fees are usually between a few hundred dollars, while application fees vary by lender and are sometimes waived during promotional periods. Valuation costs depend on property type and location, and legal or settlement fees depend on whether you use a solicitor or conveyancer.

Some lenders offer cashback incentives to offset these costs, typically paid a few months after settlement. Cashback amounts vary and should be weighed against the interest rate and ongoing fees of the loan rather than treated as the primary reason to refinance. A lower rate with no cashback often results in larger savings over the life of the loan than a higher rate with a short-term incentive.

If you are breaking a fixed rate to refinance early, break costs can be significant depending on how much time remains on the fixed period and how far rates have moved since you locked in. Your current lender can provide a break cost estimate, which should be factored into the total cost of refinancing to determine whether the move still makes financial sense.

How refinancing affects your tax deductions on investment properties

Interest on an investment loan is tax-deductible, so refinancing does not change your ability to claim that deduction as long as the borrowed funds are used for investment purposes. If you release equity and use those funds to purchase another investment property, the interest on the additional borrowing is also deductible. However, if you use released equity for private purposes such as renovating your own home or paying personal expenses, the interest on that portion is not deductible.

Keeping loan purposes separate is important for tax reporting. If you refinance and consolidate investment and private debt into a single loan, you lose the ability to clearly distinguish which portion of the interest is deductible. Most accountants recommend maintaining separate loan splits or facilities when releasing equity for mixed purposes, so the deductible and non-deductible components remain identifiable.

Refinancing costs such as discharge fees, valuation fees, and legal costs are generally deductible in the year they are incurred, while loan establishment fees may need to be deducted over five years depending on the amount. Your accountant can confirm the treatment of these costs based on your specific circumstances and the purpose of the refinance.

Refinancing an investment property is not about chasing the lowest advertised rate. It is about aligning your loan structure with your current portfolio strategy, whether that means improving cashflow, accessing equity, or preparing your serviceability for the next acquisition. Call one of our team or book an appointment at a time that works for you.

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