Smart Ways to Approach Refinancing Multiple Properties

If you own more than one property, a refinance works best when you look at all your loans together, not one at a time.

Many owners with a home and an investment property review each loan on its own. Looking at the whole picture lets you weigh up rates, loan structure, security and cashflow in one go. It also shows you where a change could cost more than it saves.

Should You Refinance Multiple Properties at Once?

Not always. Refinancing every property together can suit some people, but it can also tie your loans together in ways that are hard to undo later.

Some lenders will want all your properties as security under one arrangement. That is often called cross-collateralisation. The trade-off is less flexibility. If you later want to sell one property or move one loan to another lender, the lender may need to reassess the other loans too.

In many cases, keeping each loan secured only by its own property gives you more control. A broker can help you compare both approaches before you commit. Our refinancing team can walk you through how each lender structures this.

How Does the Refinance Process Work With More Than One Loan?

The refinance process for multiple properties follows the same basic steps as one loan, but with more paperwork and more moving parts. You apply, the lender values each property, assesses your income and debts, and then settles each loan.

Because each property needs a valuation, timing matters. If you have a fixed rate period ending on one loan and a variable loan elsewhere, you may want to stage your moves. Breaking a fixed loan early can trigger break costs, so it often makes sense to wait for the expiry date on that one.

There can also be discharge fees, application fees and other lender costs on each loan. These add up across several properties, so they need to be weighed against any savings on your interest rate.

A Worked Example: Two Loans, One Review

Consider a New Lambton owner with a home loan and an investment loan, both sitting on the same lender. They have not reviewed either loan in a while and suspect they are paying too much interest.

For illustration, say the investment loan balance is $400,000 and the rate is 6.75% p.a. on a 30 year principal and interest loan. That repayment is about $2,594 a month. Now say a lender offers a rate 0.50% lower, at 6.25% p.a., over the same 30 year term. The repayment drops to about $2,463 a month, a difference of roughly $131 a month, or about $1,570 a year.

The owner checks the costs of switching before deciding. If the discharge and setup fees come to around $600, the saving covers them in under five months. The owner moves the investment loan, leaves the home loan where it is because its fixed period has not ended, and keeps each loan secured by its own property. The outcome is lower repayments on one loan, no break costs and no cross-security. These figures are illustrative only and use an example rate, so your own numbers will differ. Try our loan repayment calculator to test your own scenario.

Can You Release Equity to Buy the Next Property?

Yes, if your properties have grown in value or your loans have reduced, you may be able to release equity to use as a deposit on another purchase. Lenders usually assess this using a fresh valuation and your ability to service the extra debt.

The trade-off is a bigger loan amount and higher repayments. Your borrowing capacity also matters, because lenders will count all existing loans against your income. It is worth checking your borrowing capacity before you apply, so you know what is realistic.

If the new property is an investment, it is worth asking about our investment loans options. For tax questions, such as how interest on borrowed funds is treated, speak with your accountant, as the outcome depends on your circumstances and how the money is used.

Which Loan Features Matter When You Hold Several Properties?

Depending on your savings and the fees, an offset account on the home loan and sensible loan splits can matter as much as a small rate difference. An offset account reduces the interest charged on the loan by the balance held in it.

Offset accounts can come with higher rates or annual package fees, so the saving needs to outweigh those costs. Redraw is another option, but money you redraw may be harder to separate from investment debt, which can complicate tax records. Your accountant can explain how this applies to you.

Some owners also choose to split a loan between fixed and variable. A fixed portion gives repayment certainty, while a variable portion usually allows extra repayments and offset use. The trade-off is that fixed portions can limit extra repayments and may involve break costs if you exit early.

Why a Loan Health Check Comes First

A loan health check is a review of your current loans, rates, fees and features, and it is a sensible first step before you decide whether to switch anything. It helps you estimate whether a refinance could save you money after fees and any break costs.

With several properties, the review also shows which loan is costing you the most and which ones are best left alone. You can read more about our loan health check and what it covers.

The RBA cash rate sits at 4.85% p.a., but the rate you are offered depends on your deposit size, your lender and your loan type. A broker can compare options across lenders so you are not relying on one bank's offer.

If you live in or around New Lambton, our local mortgage broker in New Lambton team can sit down with you and look at every loan on the table. Call one of our team or book an appointment at a time that works for you.

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