Beginner's Guide to Refinancing Eligibility

What Lenders Check When You Apply to Refinance

Lenders assess your income, property value, credit history, and loan-to-value ratio when you apply to refinance. They want to confirm you can afford the repayments and that the property provides adequate security for the loan amount.

Consider a RAAF member at Williamtown who has been in their current mortgage for three years. Their income has increased since they first borrowed, but they have also added a car loan and a small amount of credit card debt. When they apply to refinance to a lower interest rate, the lender will recalculate their borrowing capacity based on current liabilities and income. If the debt-to-income ratio is too high, the application may not proceed even though they have been meeting repayments without issue. Reducing those smaller debts before applying can make the difference between approval and decline.

Your employment history matters as well. Lenders typically want to see at least three to six months in your current role, though ADF members often benefit from the fact that Defence employment is considered stable and ongoing. If you are posted regularly, this does not count against you the way frequent job changes might for civilian applicants.

How Property Valuation Affects Refinance Approval

The lender will order a valuation to confirm the property is worth enough to support the loan amount you are requesting. If the valuation comes in lower than expected, you may need to reduce the loan amount or provide additional funds to meet the lender's loan-to-value ratio requirements.

Property values around Williamtown and neighbouring suburbs like Medowie and Fern Bay have shifted over recent years, and a property purchased at the peak may not appraise as high now. If you bought with a small deposit and property values have softened, you might find yourself in a position where your equity has reduced. Lenders typically require at least 80% loan-to-value ratio to avoid lenders mortgage insurance, though ADF members may be able to access no LMI loans at higher ratios with certain lenders.

Income Evidence and Employment Verification

You will need to provide recent payslips, tax returns, and a letter of employment or a statement from Defence confirming your role and salary. If you receive allowances such as flying allowance or deployment-related pay, lenders may include these as part of your income, but the way they treat them varies between lenders.

In our experience, ADF members often underestimate how much of their total package can be counted. Allowances that are paid regularly and are likely to continue can strengthen your application. If you have recently returned from deployment and your income appears lower on recent payslips, a letter from Defence clarifying your standard income can support the application.

What Happens If You Are Coming Off a Fixed Rate

If your fixed rate period is ending, refinancing becomes particularly relevant because the revert rate on your current loan is often higher than what you could access by switching lenders. You are not locked in once the fixed term ends, and this is one of the most common reasons ADF members refinance.

Lenders will still assess your eligibility as though you are applying for a new loan, even if you are simply moving to another lender to lock in a better rate. Your financial position may have changed since you first borrowed, so it is worth reviewing your credit file and confirming your income and expenses are documented correctly before you apply. You can request a loan health check to identify any issues that might affect approval before you formally apply.

Credit History and What Lenders Look For

Lenders will review your credit file to check for defaults, late payments, and current credit enquiries. A strong credit history supports your refinance application, while missed payments or defaults can lead to decline or higher interest rates.

If you have had a missed payment due to deployment or being out of contact, it is worth adding a note to your credit file explaining the circumstances. Some lenders are willing to look past isolated incidents if there is context. ADF members are also entitled to request financial hardship provisions if circumstances change, which can protect your credit file during difficult periods.

Debt Consolidation and How It Changes Your Application

If you want to consolidate debt into your mortgage as part of the refinance, lenders will assess the total loan amount against the property value and your capacity to service the higher repayment. Consolidating can reduce your overall interest costs, but it increases the loan amount and may push your loan-to-value ratio higher.

For example, a member with $30,000 in car and credit card debt might choose to roll this into their mortgage when refinancing. If the property has sufficient equity and the member's income supports the larger repayment, this can work well. The consolidated debt is then paid off at the mortgage rate rather than the much higher rates attached to cards and personal loans. If you are considering this approach, it is worth reviewing whether debt consolidation loans make sense for your situation.

How Long the Refinance Process Takes

Once you submit your refinance application, the process typically takes two to four weeks depending on how quickly the lender receives your documents and completes the valuation. If the property is located in a regional area or the valuer is unfamiliar with the market, this can add time.

If you are refinancing because your fixed rate is expiring, start the process at least six weeks before the expiry date. This gives you time to compare offers, gather documents, and settle the new loan without reverting to a higher variable rate on your existing mortgage.

What to Do Before You Apply

Check your credit file, confirm your property value is in line with current market conditions, and gather your income documents including payslips and a letter from Defence. If you have debts you plan to consolidate, list them with balances and account numbers. If your income has changed due to promotion, posting, or changes in allowances, make sure you have documentation that reflects your current situation.

Call one of our team or book an appointment at a time that works for you. We will walk through your refinance application, confirm what lenders need to see, and make sure the application is structured to give you the outcome you are after without unnecessary delays.

Frequently Asked Questions