Refinancing approval works like a new home loan application, but with one advantage: lenders can see your repayment history.
If you've been paying your mortgage on time for the past 12 months, most lenders view this as strong evidence you can manage the new loan. However, they still assess your current income, living expenses, and any changes in your financial position since you first borrowed. The approval process typically takes two to four weeks from application to formal approval, with another four to six weeks to reach settlement.
What Lenders Assess During Refinance Approval
Lenders review your serviceability based on your current income and expenses, not what you earned when you first took out your mortgage. They calculate whether you can afford the loan at an assessment rate that sits 2.5% to 3% above the actual rate you'll pay. Your credit file is checked for any missed payments, defaults, or recent credit applications. A property valuation is ordered to confirm your home's current value and calculate your loan-to-value ratio. If your property has increased in value since purchase, you may have more equity available. If values have softened or you've made minimal principal reductions, you might need to provide additional documentation or accept a higher rate.
Consider a homeowner in Mt Eliza who purchased three years ago and has been making extra repayments into their offset account. Their property value has held steady, and their combined income has increased. During the refinance assessment, the lender confirmed their serviceability had improved, and they qualified for a lower rate product with a larger offset facility. The application moved through in under three weeks because their financial position had strengthened since the original purchase.
Fixed Rate Expiry and Timing Your Application
If your fixed rate is ending in the next three to six months, start your refinance application at least eight weeks before the expiry date. Lenders can approve your application in advance and lock in a rate, but settlement must occur after your fixed period ends to avoid break costs. Missing this window means you'll revert to your lender's standard variable rate, which is often higher than the discounted rates available through refinancing. Some lenders in Mt Eliza allow you to apply up to 90 days before settlement, giving you time to compare offers and prepare documentation without the pressure of an imminent rate increase.
When Income or Employment Has Changed
Lenders assess your current employment status and income, not what you declared years ago. If you've changed jobs recently, most lenders want to see at least three months of payslips in your new role, though some will accept an employment contract if you're still in probation. Self-employed borrowers need to provide two years of tax returns and often a letter from their accountant confirming ongoing trading. If your income has dropped or you've moved from full-time to part-time work, your borrowing capacity may be lower than when you first purchased. In these situations, keeping your loan amount the same or reducing it through a refinance can still be approved, but accessing additional equity may not be an option.
Accessing Equity Through Refinancing
Refinancing to access equity requires a property valuation and a clear purpose for the funds. Lenders typically allow you to borrow up to 80% of your property's value without paying lenders mortgage insurance, though some will lend up to 90% depending on your circumstances. If you're looking to access equity for an investment property deposit, renovations, or debt consolidation, the lender will assess the new loan amount against your income and expenses. The approval process takes longer when equity is involved because the lender needs to understand how the additional funds will be used and whether the increased debt is sustainable.
As an example, a Mt Eliza family wanted to release equity to purchase an investment property in Frankston. Their home had increased in value, giving them access to around $150,000 in usable equity while staying under the 80% threshold. The lender approved the refinance based on their ability to service both the increased home loan and the future investment loan. The equity was released at settlement, and they used it as a deposit within the following month. The entire process from application to receiving the funds took nine weeks.
How the Application Process Works in Practice
You'll need to provide recent payslips, tax returns if self-employed, bank statements covering the past three months, and details of any other debts or ongoing financial commitments. The lender orders a property valuation, which is usually completed within a week. Once the valuation is received, the credit assessor reviews your application and either issues formal approval or requests additional information. After formal approval, the file moves to the lender's settlement team, who liaise with your solicitor or conveyancer to arrange the discharge of your existing mortgage and registration of the new one. During this time, you'll need to arrange a final inspection if the lender requires one, particularly for properties in coastal areas like Mt Eliza where erosion or weather exposure can affect valuations.
What Happens If the Valuation Comes In Low
If the valuation is lower than expected, your loan-to-value ratio increases, which can affect your rate or eligibility for certain loan products. Some lenders have stricter criteria for loans above 80% LVR, and you may need to pay lenders mortgage insurance or accept a higher interest rate. In some cases, the lender will decline the application if the valuation pushes your LVR too high. You can request a second valuation or provide evidence of recent comparable sales in your area, though this doesn't guarantee a change. If the valuation issue can't be resolved, you may need to adjust your loan amount, contribute additional funds, or stay with your current lender until your property value improves or your loan balance reduces.
Refinancing With Investment Properties or Multiple Loans
If you own investment properties or have multiple loans, the refinance assessment becomes more involved. Lenders calculate rental income at 80% of the actual rent received to account for vacancies and maintenance costs. They also assess the combined debt across all your properties, not just the one you're refinancing. This can affect your serviceability, particularly if one of your investment properties is negatively geared. In Mt Eliza, where many homeowners also hold investment properties on the Mornington Peninsula or in Frankston, the approval process often requires a detailed review of your entire portfolio. A loan health check can identify whether refinancing one property or restructuring your entire loan setup makes more sense.
Why Some Applications Take Longer Than Others
Approval time depends on how complete your application is, the lender's current processing times, and whether any issues arise during assessment. Applications with straightforward PAYG income, no credit issues, and a property that values as expected move through quickly. Applications involving self-employment, recent job changes, or properties in regional areas can take longer because the lender needs additional documentation or a more detailed valuation. If you're refinancing close to fixed rate expiry, delays can push settlement past your deadline, so building in extra time is important. Working with a mortgage broker in Mt Eliza who knows which lenders are processing quickly and what documentation they prioritise can reduce your approval time.
Once your refinance settles, your old loan is discharged, and your new loan begins. Your first repayment is usually due within the first month, and any offset or redraw features are available immediately. If you've refinanced to access equity, those funds are typically released at settlement and transferred to your nominated account. From there, you'll receive a new loan statement and can start managing your mortgage through your new lender's online platform.
If you're considering refinancing or your fixed rate is ending soon, call one of our team or book an appointment at a time that works for you. We'll walk you through the approval process, help you understand what documentation you'll need, and find a loan structure that suits your financial position.
Frequently Asked Questions
How long does refinance approval take in Mt Eliza?
Refinance approval typically takes two to four weeks from application to formal approval, with another four to six weeks to reach settlement. Applications with complete documentation and straightforward income move through faster than those involving self-employment or complex property portfolios.
What do lenders assess during a refinance application?
Lenders assess your current income, living expenses, credit history, and repayment behaviour over the past 12 months. They also order a property valuation to confirm your home's current value and calculate your loan-to-value ratio.
Can I refinance if my income has changed since I bought my property?
You can refinance if your income has changed, but lenders assess your current income and employment status. If your income has dropped, you may still be approved if you're keeping the same loan amount or reducing it, but accessing additional equity may not be possible.
When should I start my refinance application if my fixed rate is ending?
Start your refinance application at least eight weeks before your fixed rate expires. This gives you time to compare offers, prepare documentation, and complete the approval process without reverting to your lender's higher standard variable rate.
What happens if my property valuation comes in lower than expected?
A low valuation increases your loan-to-value ratio, which can affect your rate or eligibility for certain products. You may need to pay lenders mortgage insurance, accept a higher rate, or adjust your loan amount to proceed with the refinance.
