How to Qualify for Refinancing Your Home Loan

What Lenders Look for When You Refinance

Lenders assess three main things when you refinance: your current income and employment, the equity you hold in your property, and your credit history. Unlike your original home loan, the lender is also evaluating how well you've managed that existing debt.

Your income needs to support the loan amount you're requesting. Most lenders want to see stable employment, typically at least three to six months in your current role if you're a permanent employee. If you're self-employed, you'll usually need to provide two years of financials, including tax returns and often a business accountant's letter. Casual workers can refinance, but you'll need to show at least six to twelve months of consistent hours with the same employer.

Your borrowing capacity matters just as much now as it did when you first bought. Lenders will review your living expenses, any credit card limits, personal loans, or other debts. If your spending has increased or you've taken on more debt since you bought, that can reduce what you qualify for.

How Much Equity You Need to Refinance

Most lenders require at least 20% equity in your property to refinance without paying lenders mortgage insurance. If you purchased recently or property values in your area have stayed flat, you might not have enough equity yet.

Equity is calculated as the difference between your property's current value and what you owe on the loan. Consider a homeowner in Rockingham who bought three years ago. If the property was valued at the time of purchase and has since appreciated, they may now hold enough equity to refinance. If values have remained steady or declined, they might need to wait or accept the cost of lenders mortgage insurance to proceed.

If you're looking to access equity for an investment property deposit or renovations, you'll need more than 20%. Most lenders cap lending at 80% of your property value, so you can typically access any equity above that threshold. Some lenders will go to 90% or even 95%, but the terms tighten and insurance applies.

Your equity position also determines which lenders and loan products are available to you. A homeowner with 40% equity has far more options than someone sitting at 15%.

Your Credit File and Loan Repayment History

Your credit file plays a significant role in refinancing eligibility. Lenders will review your credit score, any defaults, and whether you've made all your mortgage repayments on time.

If you've missed a mortgage payment in the last 12 months, most lenders will decline your application outright. If the missed payment was 12 to 24 months ago, some lenders may still consider you, but your options narrow. Defaults, court judgments, or part nine debt agreements will make refinancing difficult unless they've been paid and sufficient time has passed.

Even small issues can matter. Consistently making late credit card payments or exceeding your card limit signals risk to lenders, even if you've never missed a mortgage payment. If you know you'll want to refinance in the next six to twelve months, get your credit file in order now. Pay down credit cards, close any accounts you're not using, and make sure everything is paid on time.

The Property Valuation and Location Factor

The lender will value your property as part of the refinance process. This might be a desktop valuation, a kerbside valuation, or a full inspection, depending on the lender and loan amount.

If the valuation comes in lower than expected, your equity drops and your loan-to-value ratio increases. That can mean you no longer meet the lender's requirements, or you'll need to pay lenders mortgage insurance. This is more common in suburbs where property values have softened or where the market is less active.

In Perth, some suburbs have seen stronger value growth than others. Areas closer to the coast or near major infrastructure projects often hold their value during quieter periods, while outer suburbs can be more variable. Lenders also have different appetites for certain locations. A property in a well-established suburb like Mount Lawley or Subiaco might be viewed more favourably than one in a newer, less established area.

If your property is in a regional area or on a larger block with unusual features, some lenders may decline to refinance or offer less favourable terms. It's worth knowing how your property is likely to be viewed before you start the application.

When Employment Changes Affect Your Application

Changing jobs or employment type during the refinance process can delay or derail your application. Lenders want to see stability, and a recent job change raises questions about ongoing income.

If you're moving from one permanent role to another in the same industry, most lenders will accept this as long as you've passed probation or can show a signed contract. If you're moving from permanent to casual or contract work, or if you're switching industries entirely, the lender may ask you to wait until you've established a track record in the new role.

Self-employed borrowers face stricter requirements. If your business is new or your income has dropped in the most recent financial year, lenders may decline the application or reduce the loan amount they're willing to offer. If you're planning to refinance and you're self-employed, timing the application around your tax return and business activity statements matters.

What Happens If You Don't Meet the Requirements

If you don't meet the eligibility requirements right now, you have options. You can wait and improve your position, or you can explore lenders with more flexible criteria.

Some lenders specialise in non-standard situations, such as recent credit issues, casual employment, or low equity. The trade-off is usually a higher interest rate or additional fees. In some cases, paying lenders mortgage insurance to refinance at a higher loan-to-value ratio still makes sense if you're moving off a much higher rate.

Another option is to strengthen your application before you apply. Pay down other debts, increase your savings buffer, or wait for your next pay rise to reflect in your payslips. A loan health check can help you identify what's holding you back and what you can address in the short term.

If you're coming off a fixed rate period and your current lender is offering an uncompetitive rate, it's worth exploring what you qualify for elsewhere. Even if your options are limited, you may still find a rate that saves you money compared to staying put.

Refinancing isn't always possible for everyone at every moment, but it's rarely a permanent no. Most eligibility issues can be resolved with time or strategy. Call one of our team or book an appointment at a time that works for you, and we'll walk through your situation and show you what's possible now or what you'd need to do to qualify down the track.

Frequently Asked Questions