Refinancing Investment Loans

The mechanics of switching lenders are similar, but the consequences are not. On an investment loan the structure carries tax weight: the loan purpose drives whether interest is deductible under current law, the choice between offset and redraw can affect the deductibility character of the borrowing, and the timing of an equity release or a refinance can intersect with the rental schedule and any CGT event on the underlying property. On an owner-occupier loan none of that applies. Our general refinancing service covers both kinds of borrowing; this page narrows to the investor-specific decisions. See /finance/refinancing for the broader service.

Most interest-only investment loans have a maximum interest-only period (commonly five years) after which they revert to principal-and-interest, which lifts the required repayment. Before the term expires you generally have three paths: let it revert to principal-and-interest, apply to extend the interest-only period with the existing lender (subject to a fresh serviceability assessment), or refinance to a new lender on interest-only terms. Each path has a different cash-flow profile and a different cost. We model the options in writing — including the serviceability the new repayment requires — before any application.

Deductibility follows the use of the borrowed funds, not the lender. Where the refinanced borrowing continues to fund an income-producing investment property, interest is generally deductible against that assessable income under current law, subject to current ATO rules and your circumstances. The risk at refinance is contamination: if you increase the loan and use the extra funds for a private purpose, that portion of the interest is generally not deductible, and a mixed-purpose loan can be difficult to apportion afterwards. This is general information only — the tax side of the practice documents loan purpose at refinance so the deductibility position is clean. Personal tax advice should be sought.

Often, yes — subject to lender policy, valuation and serviceability. Releasing usable equity at refinance is a common way to fund the deposit and costs on the next investment property. The discipline that matters is loan purpose: equity drawn for an investment deposit is treated differently from equity drawn for private use, so the released funds are best held in a clearly separated split or account and applied directly to the investment. The mechanics — usable equity at the 80% LVR ceiling, splits and purpose tracing — are set out on our equity release for investors page (/property-investors/equity-release-for-investors), and we document the purpose at drawdown.

Under current law, where the deductible costs of holding an investment property — including loan interest — exceed the rental income, the net rental loss is generally deductible against your other assessable income; this is commonly called negative gearing. It is one input into the holding cost of the property and therefore into whether a rate or structure change is worth pursuing, but it is not a reason to refinance on its own. This is changing: the Treasury Laws Amendment (Tax Reform No. 1) Act 2026 (No. 49 of 2026) received Royal Assent on 26 June 2026 and is law. From the 2027–28 income year, residential-property deductions that exceed the income from the property are quarantined — carried forward rather than deducted against other income in that year — and transitional rules apply to an ownership interest last acquired before 7.30 pm (ACT time) on 12 May 2026. The current rules apply until then. Our guide on how negative gearing works sets out the basics, our technical resources cover the enacted changes in depth (see /technical-resources/negative-gearing-changes-2027-28 and /technical-resources/cgt-discount-changes-from-2027), and we work from the law that applies to the year in question.

If you refinance away from a fixed-rate investment loan before the fixed term ends, the existing lender may charge a break-cost fee, calculated on the difference between your fixed rate and the lender’s current cost of funds for the remaining fixed period. On larger investment balances a break cost can be material. The existing lender provides a current figure on request, and we factor it into the breakeven analysis so the refinance is assessed on its full cost, not just the headline rate.

In most residential lending scenarios, the lender pays broker commission. We explain remuneration in our Credit Guide. For standard residential investment refinances Eternity Mortgage Solutions is typically paid by the new lender on settlement rather than by you. For complex or specialist refinances a fee-for-service arrangement may apply; if so, it is confirmed in writing before work starts.