Refinancing an investment property follows the same broad process as refinancing an owner-occupied home, but there are key differences in pricing, LVR limits, tax implications, and lender assessment that make it worth treating as a distinct exercise.
Investment property loans carry a rate premium of 0.2–0.5% over equivalent owner-occupier loans. This premium applies whether you are taking out a new investment loan or refinancing an existing one. When comparing refinancing offers, always ensure you are comparing investment rates against investment rates — some lenders lead with their owner-occupier rate in advertising and investors need to ask specifically for the investment product rate.
Most lenders cap investment property loans at 80% LVR for their standard pricing. To refinance without LMI, you need the outstanding loan balance to be 80% or less of the current property value. If your investment property has increased in value since you purchased it, your LVR has likely improved — calculate your current LVR before approaching lenders.
LMI on investment properties is more expensive than on owner-occupied properties, and some LMI providers charge a further loading for investment. If you are above 80% LVR, consider whether a partial paydown to reach 80% before refinancing avoids LMI and improves the refinancing economics.
Interest on investment property loans is tax-deductible as long as the loan funds are used for investment purposes. When you refinance an investment loan, the deductibility is preserved as long as:
If you extract additional equity at refinancing and use it for personal purposes (renovating your home, buying a car), the extracted portion is not deductible. Keep the investment and personal loan splits strictly separate.
Mixed-purpose loan trap: If you have ever redrawn from your investment loan for personal use, that portion of the loan may not be tax-deductible. This is a common issue that requires a tax accountant to review and potentially separate into loan splits. Do not assume the entire investment loan balance is deductible if there have been personal redraws.
Many investment property owners prefer interest-only repayments to maximise cash flow and deductible interest. IO periods are typically capped at 5 years, after which the loan converts to P&I. When refinancing, you can request a new 5-year IO period from the new lender — effectively resetting the IO clock. This is a common strategy for investors wanting to maximise tax deductions over the long term. Be aware that APRA periodically restricts IO lending growth at the system level.
Refinancing is also used to access equity in an investment property to fund deposits for additional investment properties. This is a common strategy in property portfolio building. The key requirement is sufficient equity to cover the extracted amount plus maintain an acceptable LVR. APRA-regulated lenders assess the cumulative debt across your portfolio — serviceability for an investor with multiple properties can be complex, particularly for those with high negative gearing exposures.
The best time to refinance an investment property is:
When IO makes sense for investors and what happens at IO period end.
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