Refinancing Approval: What to Expect and How to Prepare

Refinancing puts your loan through a new approval process, and lenders assess it as if you're borrowing for the first time.

If you're in Eltham and considering a refinance, the approval process involves serviceability checks, valuation requirements, and documentation that reflects your current financial position. Lenders don't simply transfer your existing loan at a new rate. They reassess your income, expenses, credit history, and the property's current value. If circumstances have changed since you first borrowed, you'll need to understand how that affects your application.

Why Lenders Treat Refinancing Like a New Application

Lenders assess refinance applications with the same rigour as new loans because they're taking on a new commitment. Your income, employment, debts, and the property's value might all have shifted since your original approval. Lenders need to confirm you can still service the loan amount, even if you've been paying it without issue for years.

Consider a couple in Eltham who bought a home several years ago when both worked full-time. One partner has since reduced hours to part-time, and they've also taken on a car loan. Even though they've never missed a mortgage payment, the lender will assess their current income and commitments. If their serviceability has tightened, they may need to adjust the loan amount, include an offset account to demonstrate savings buffer, or wait until their car loan balance reduces.

Income and Serviceability Requirements

You'll need to prove your current income using recent payslips, tax returns, or financial statements depending on how you earn. Lenders apply serviceability buffers and assessment rates that can be higher than the actual rate you'll pay. If your income has dropped, your expenses have increased, or interest rate buffers have changed, you may not be approved for the same loan amount you currently owe.

In our experience, this catches people off guard when they assume refinancing simply means switching lenders. If you're coming off a fixed rate period and your income has shifted, it's worth running the numbers before you apply. A loan health check can clarify whether your current circumstances will support the refinance before you commit to an application.

Property Valuation and Loan-to-Value Ratio

Most lenders require a valuation to confirm your property's current worth. If property values in Eltham have risen, that works in your favour and may reduce your loan-to-value ratio, giving you access to better rates. If values have stalled or dropped, you could find yourself outside the equity band you expected.

Valuations are typically conducted using an automated desktop model, though some lenders still send a valuer to the property depending on the loan amount and circumstances. If the valuation comes in lower than anticipated and your loan balance sits above 80% of the property's value, you may be charged lender's mortgage insurance or offered a higher rate. You can't control the valuation outcome, but you can ensure your property is presented well if a physical inspection is required.

Credit History and Existing Debts

Lenders will pull your credit file during the application. Missed payments, defaults, or credit enquiries from recent applications all appear and can influence the decision. If you've taken on additional debt since your original loan, such as personal loans or credit cards, lenders factor those commitments into your serviceability.

As an example, someone refinancing to access equity for an investment property may find their application is affected by a recently opened buy-now-pay-later account they'd forgotten about. Even small debts reduce your borrowing capacity. Reviewing your credit file before you apply gives you time to address anything that might cause concern.

Documents You'll Need to Provide

The refinance application requires proof of income, identification, recent statements for any debts, and details of your current mortgage. You'll also need to disclose your living expenses, and lenders often apply a minimum household expenditure measure if your declared costs seem low. If you're self-employed, expect to provide two years of tax returns and possibly business financials.

Preparing these documents in advance speeds up the process. Lenders typically request updated payslips or statements during assessment, so having recent versions ready avoids delays. If your circumstances are less conventional, such as income from multiple sources or recent employment changes, working with a broker helps you frame the application in a way that addresses lender concerns upfront.

How Long the Approval Process Takes

Most refinance applications are assessed within a few days to two weeks, depending on the lender's workload and how complete your documentation is. Valuation turnaround times can vary, particularly in areas like Eltham where desktop valuations are common but may occasionally require a physical inspection. Settlement usually occurs within four to six weeks of approval, though this can be shorter if the lender is efficient and there are no complications.

If you're refinancing because your fixed rate is ending soon, start the process at least two months before expiry. Leaving it until the last minute puts you at risk of rolling onto a higher variable rate while your new loan is still being processed.

What Happens If Your Application Is Declined

A declined application doesn't mean you can't refinance at all. It means that particular lender, with their specific policy settings, couldn't approve your loan under the terms you applied for. Different lenders assess income, expenses, and property types in different ways. A lender that declines a refinance for someone with variable freelance income might still approve if the loan amount is reduced or structured differently.

We regularly see this with clients who apply directly to their bank and receive a decline, only to be approved by a different lender with more flexible serviceability policies. If your application is knocked back, review the reason with someone who understands lender policies before assuming refinancing isn't possible.

Refinancing approval depends on your current circumstances, not just your repayment history. If your income, debts, or property value have shifted, those changes will shape the outcome. Getting your documents in order and understanding how lenders assess your position makes the process far less uncertain.

Call one of our team or book an appointment at a time that works for you. We'll assess your serviceability, review your options, and structure your refinance application to give it the strongest chance of approval.

Frequently Asked Questions