Many first-time buyers enter the property market with an introductory or discounted rate that reduces after one to three years.
When that period expires, the loan typically reverts to a higher standard variable rate. Refinancing at this point can reduce your monthly repayments and give you access to features that suit your current circumstances. Business owners on the Lower North Shore who purchased their first property in recent years often face this decision as their initial discount period comes to an end.
What Happens When Your First-Time Buyer Rate Expires
Your loan reverts to the lender's standard variable rate, which is usually 0.30% to 0.80% higher than the discounted rate you were paying.
Consider a business owner who purchased in Neutral Bay with a two-year introductory rate of 5.90%. At the end of that period, the loan reverted to 6.50%. On a loan amount of $750,000, that increase added roughly $300 to monthly repayments. The borrower refinanced to a new lender offering 6.10% with an offset account, which reduced the monthly cost and provided a place to park business income between tax payments.
How Refinancing Works After Your Introductory Period
You apply for a new home loan with a different lender, and that lender pays out your existing loan.
The refinance process involves a property valuation, income verification, and a credit check. Most lenders require recent tax returns if you are self-employed, along with business activity statements and a profit and loss statement. The application usually takes two to four weeks from submission to settlement, depending on the lender and whether the valuation comes back at or above the purchase price.
If the property has increased in value since you purchased, you may have additional equity that can be accessed for other purposes, such as equipment upgrades or working capital. If the value has remained flat or declined slightly, you can still refinance to a lower rate, but you will not be able to release any equity without bringing additional funds to settlement.
When Refinancing Makes Sense for Business Owners
Refinancing is worth considering when your rate increases by more than 0.25%, or when you need features your current loan does not offer.
Business owners often benefit from an offset account, which allows you to park operating funds and reduce the interest charged on your home loan without locking that money away. If your current loan has a redraw facility instead, accessing those funds can take several days and may require approval from the lender. An offset account gives you immediate access through a linked transaction account.
Another reason to refinance is to consolidate short-term debt. If you are carrying a business overdraft or equipment finance at 8% to 12%, rolling that debt into your mortgage at 6% can improve cashflow. The downside is that you are spreading short-term debt over a 25 or 30-year loan term, so the total interest paid over the life of the loan may be higher even though the monthly cost is lower.
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Comparing Rates and Features During a Refinance
You want to compare the interest rate, the fees, and the features that matter to your situation.
Some lenders advertise low headline rates but charge higher ongoing fees or offer limited features. A loan with a slightly higher rate but a full offset account and no monthly fees can work out cheaper over time than a loan with a lower rate and a $15 monthly account-keeping fee.
When reviewing refinance options, check whether the new loan includes a redraw facility or an offset account, whether there are any restrictions on extra repayments, and whether the lender charges break costs if you decide to refinance again when your fixed rate period ends. Some lenders also offer cash contributions to cover valuation or legal costs, which can reduce your upfront expenses.
What a Loan Health Check Reveals
A loan health check compares your current loan against what is available in the market and identifies whether refinancing would reduce your costs or improve your loan structure.
It involves reviewing your interest rate, your loan features, your repayment amount, and your goals for the next few years. If you are planning to buy an investment property, for example, it may make sense to refinance now and structure the loan so that you can access equity later without needing to refinance again. If you are planning to renovate, you might want a loan with a construction facility or a line of credit attached.
In our experience, first-time buyers who purchased with a 10% deposit and an introductory rate often have enough equity after two or three years to refinance without lenders mortgage insurance, which opens up more competitive lending options.
Fixed or Variable After Your Introductory Period
You can refinance to a variable rate, a fixed rate, or a split between the two.
Variable rates give you flexibility to make extra repayments and access offset or redraw features. Fixed rates provide certainty over your repayments for a set period, usually one to five years, but most fixed rate loans restrict extra repayments to $10,000 or $20,000 per year and do not offer offset accounts.
For business owners with fluctuating income, a variable rate with an offset account is often the most practical option. If you prefer certainty and your income is stable, fixing a portion of the loan can lock in your repayments while keeping the rest on a variable rate with full offset access.
The Refinance Application Process for Self-Employed Borrowers
Lenders assess self-employed borrowers differently to PAYG employees, and the documentation required is more detailed.
You will need two years of tax returns, two years of business financials, and recent business activity statements. Some lenders also require a letter from your accountant confirming your income and the stability of your business. If your income has declined in the most recent financial year, lenders may use the lower figure or ask for an explanation.
If your business has been affected by seasonal factors or one-off expenses that reduced your taxable income, providing context in a letter or through your broker can help the lender assess your application more accurately. Lenders are looking for consistency and the ability to service the loan, not necessarily the highest possible income.
Costs Involved in Refinancing
You will pay a valuation fee, discharge fee from your current lender, and possibly legal or settlement fees with the new lender.
Valuation fees typically range from $200 to $400. Discharge fees are usually $300 to $500. Some lenders charge an application fee of $600 to $800, although many waive this as part of a refinance offer. Legal and settlement fees depend on whether you use a solicitor or conveyancer and can range from $800 to $1,500.
If you are refinancing within a fixed rate period, you may also be charged break costs, which can run into the thousands of dollars. If your introductory rate was variable, there are no break costs.
Call one of our team or book an appointment at a time that works for you to review your current loan and discuss whether refinancing will reduce your repayments or unlock features that align with your goals.
Frequently Asked Questions
When should I refinance after my first-time buyer rate expires?
You should consider refinancing when your loan reverts to a higher standard variable rate, typically 0.30% to 0.80% above your introductory rate. Refinancing is usually worthwhile if the rate increase is more than 0.25% or if you need features your current loan does not offer.
What documents do I need to refinance as a business owner?
You will need two years of tax returns, two years of business financials, recent business activity statements, and sometimes a letter from your accountant confirming your income. Lenders assess self-employed borrowers based on consistency and serviceability rather than the highest possible income.
Can I access equity when I refinance?
You can access equity if your property has increased in value since you purchased it. This equity can be used for purposes such as equipment upgrades or working capital, but you will need a current valuation to confirm the property value.
What fees should I expect when refinancing?
Typical costs include a valuation fee of $200 to $400, a discharge fee from your current lender of $300 to $500, and legal or settlement fees of $800 to $1,500. Some lenders waive application fees as part of a refinance offer.
Should I choose a fixed or variable rate when refinancing?
Variable rates offer flexibility for extra repayments and access to offset accounts, while fixed rates provide repayment certainty but often restrict extra repayments and do not include offset features. Business owners with fluctuating income often benefit from a variable rate with an offset account.
