What is Refinancing for Investment Properties?

As a teaching assistant, building wealth through property investment can be a strategic way to secure your financial future. However, your investment property loan shouldn't be something you simply set and forget. Regular loan reviews can reveal opportunities to save thousands of dollars or unlock equity for your next purchase.

Mortgage refinancing for investment properties involves switching your current home loan to a different loan product, either with your existing lender or a new one. This process can help you access a lower interest rate, improve your loan features, or release equity in your property for further investments.

Why Refinance Your Investment Property?

There are several compelling reasons why teaching assistants might consider refinancing their investment property loans:

Accessing Lower Interest Rates

If you're stuck on a high rate, refinancing could potentially save you substantial amounts each year. Even a reduction of 0.25% on a $400,000 loan amount could save you over $1,000 annually. With interest rates fluctuating, conducting a home loan health check regularly ensures you're not paying too much interest.

Coming Off a Fixed Rate Period

Many investors face higher repayments when their fixed rate expiry occurs. If your fixed rate period is ending, now is the time to review your options. You might choose to switch to variable, lock in another fixed rate, or refinance to a different lender offering potentially more favourable terms.

Releasing Equity for Your Next Property

As property values increase, you build equity in your investment. Equity release allows you to access this wealth without selling your property. Many teaching assistants use this strategy to expand their property portfolio or buy their first investment property.

Improving Loan Features

Older investment loans may lack features like offset accounts or redraw facilities. A refinance offset account can help reduce the interest you pay by offsetting your savings against your loan balance. Similarly, refinance redraw options provide flexibility to access extra repayments when needed.

Consolidating Debt

If you have personal loans, car loans, or credit card debt, you might consolidate these into your mortgage at a lower interest rate, potentially improving your cashflow.

When to Refinance Your Investment Property

Timing your refinance matters. Consider a loan review if:

• Your fixed interest rate is approaching expiry
• You notice better rates available in the market
• Your property has increased in value significantly
• You want to access equity for another investment
• Your current lender hasn't offered you competitive rates
• Your financial situation has improved, making you eligible for lower rates
• You want to change from variable interest rate to fixed interest rate (or vice versa)

Understanding the Refinance Process

The refinance application doesn't need to be complicated. Here's what typically happens:

1. Home Loan Health Check: Review your current loan terms, interest rate, and features
2. Compare Refinance Rates: Research current refinance rates across multiple lenders
3. Property Valuation: Your new lender will assess your property's current value
4. Submit Application: Provide documentation including income verification, property details, and existing loan information
5. Approval and Settlement: Once approved, the new lender pays out your old loan and your new loan begins

For teaching assistants, working with specialist brokers who understand the education sector can make the refinance process smoother.

Fixed vs Variable: What's Right for Your Investment?

When you refinance, you'll need to decide between fixed and variable interest rates:

Variable Interest Rate

• Fluctuates with market conditions
• Often comes with offset accounts and redraw facilities
• Provides flexibility for extra repayments
• May decrease if the market moves favourably

Fixed Interest Rate

• Locked rate for a set period (typically 1-5 years)
• Provides certainty for budgeting
• Protects against rate increases
• May have restrictions on extra repayments

Some investors choose a split loan, combining both variable and fixed portions for balanced flexibility and certainty.

Accessing Equity for Investment Growth

One of the most powerful reasons to refinance is to unlock equity. If your investment property has increased in value, you may be able to access this equity without selling.

For example, if you purchased a property for $500,000 and it's now valued at $650,000, you've built $150,000 in equity (plus any loan repayments you've made). Through a cash out refinance, you could potentially release a portion of this equity to fund:

• A deposit for your next investment property
• Renovations to increase rental yield
• Debt recycling strategies
• Other investment opportunities

Keep in mind that lenders typically require you to maintain at least 20% equity in the property to avoid Lenders Mortgage Insurance (LMI).

How Much Can You Save When You Refinance?

The potential savings from refinancing depend on several factors:

• The difference between your current and new interest rate
• Your remaining loan amount
• The loan term remaining
• Any fees associated with breaking your current loan
• Application fees and ongoing fees with the new lender

As a teaching assistant, even modest savings can add up significantly over the life of your loan. Saving thousands through lower interest rates means more money for future investments or everyday expenses.

Considering the Costs

While refinancing can offer substantial benefits, be aware of potential costs:

• Discharge fees from your current lender
• Application fees for the new loan
• Property valuation fees
• Settlement fees
• Potential break costs if leaving a fixed rate early

A thorough loan review will help determine whether the long-term savings outweigh these upfront costs.

Making Your Move

Refinancing your investment property can be a strategic move to reduce loan costs, improve cashflow, and position yourself for continued property investment growth. Whether you're looking to save money refinancing to a lower rate, access equity for your next purchase, or improve your loan features, understanding your options is the first step.

For teaching assistants who want to make informed decisions about investment loan refinancing, working with brokers who specialise in the education sector ensures you receive tailored advice that considers your unique employment benefits and circumstances.

Don't let your investment loans sit idle while potentially leaving money on the table. A regular home loan health check can reveal opportunities you might be missing.

Call one of our team or book an appointment at a time that works for you to discuss how refinancing could benefit your investment property strategy. You can also request a call back if that's more convenient, and we'll help you explore whether now is the right time to move your mortgage to a more suitable loan.