Refinancing Before Selling: The Pros and Cons

Refinancing before you sell rarely makes financial sense if you're planning to list within six months.

The costs involved in refinancing, including application fees, valuation fees, and potential discharge costs, typically take at least 12 to 18 months of interest savings to recover. If you're selling shortly after refinancing, you'll pay these costs without gaining the benefit of lower repayments over time. Add to that the discharge fees when you settle on the sale, and you're paying to exit two loans instead of one.

When Refinancing Before Sale Makes Sense

Refinancing before selling makes sense in two specific situations: when your sale timeline is uncertain and you're stuck on an uncompetitive rate, or when you need to access equity to fund a deposit on your next property before settlement.

Consider a RAAF member at Laverton who owns a property interstate but plans to sell once they receive posting orders. If those orders could come in three months or three years, staying on a high rate while waiting costs more than the refinance fees. In our experience, defence members with uncertain timelines benefit from refinancing to a loan with no ongoing monthly fees and the option to redraw or offset, particularly if they're currently paying 6.5% or higher on a loan that reverted from a fixed rate period.

The second scenario involves timing. If you've found your next property but your current home hasn't sold yet, accessing equity through refinancing can fund the deposit without needing a bridging loan. A loan health check will confirm whether your equity position and income support this approach, but it's only viable if you're confident the sale will occur within 12 months.

The Cost Structure of Refinancing

Refinancing typically costs between $1,500 and $3,500 in upfront fees, depending on whether your lender charges an application fee and whether you need a new property valuation.

Most lenders waive application fees as part of refinance campaigns, but some still charge between $400 and $700. Valuation fees range from $200 to $400 for standard residential properties, though some lenders cover this cost if your loan amount exceeds a certain threshold. Discharge fees on your existing loan sit between $300 and $500, and you'll pay another discharge fee when you sell. If you refinance and then sell six months later, you've paid two sets of discharge fees for minimal benefit.

Legal fees and government charges don't apply to refinancing in the same way they do for purchases, but you should factor in the time cost of gathering payslips, preparing documents, and managing the application while also preparing a property for sale.

Accessing Equity Without Refinancing

If you need equity to fund your next purchase, refinancing isn't the only option.

A bridging loan allows you to borrow against your existing property without refinancing your current mortgage. You'll pay a higher interest rate on the bridged amount, typically 1% to 2% above standard variable rates, but only for the short period between purchasing your next property and settling the sale of your current one. For defence members with a confirmed sale contract, this can be more cost-effective than refinancing, paying discharge fees, and then discharging again within months. Bridging loans for ADF members are structured to account for service income and can accommodate overlap periods of up to six months.

Another option is a top-up on your existing loan. Not all lenders offer this, and approval depends on your current equity and serviceability, but if available, it avoids the full refinance process. You'll stay on your current interest rate, which may or may not be competitive, but you'll save on application and discharge fees.

What Happens If You Refinance Then Sell Quickly

If you refinance and then sell within the first 12 months, you'll likely trigger clawback clauses that require you to repay any cashback or incentive offered by the new lender.

Most lenders attach clawback terms to refinance offers, requiring you to maintain the loan for at least 12 months. If you discharge early, the lender will deduct the cashback amount from your final payout, and in some cases, you may also be required to repay any waived fees. This can add $2,000 to $4,000 to your exit costs, depending on the incentive package you received.

Discharge processing times also vary. Some lenders process discharge requests within 10 business days, while others take up to four weeks. If your sale settlement is tight, a slow discharge from a recently refinanced loan can delay settlement and trigger penalty interest or contractual breaches. Your conveyancer will need discharge authority from both your old lender, if fees are still owing, and your new lender.

Fixed Rate Expiry and Sale Timing

If your fixed rate is ending soon and you're planning to sell within the year, switching to a variable rate on your existing loan is often more practical than refinancing to a new lender.

Most lenders allow you to move from a fixed rate to a variable rate without triggering break costs, and you'll avoid the application and setup costs associated with refinancing. You'll also retain the option to discharge the loan without clawback penalties when your sale settles. For defence members at Laverton who are planning a move after a posting cycle, this approach keeps your loan flexible without locking you into a new 12-month clawback period. More detail on managing this transition is covered in our article on fixed rate expiry.

If you're currently on a fixed rate and need to sell before the fixed period ends, check your break costs before making any decisions. Break costs can range from zero to several thousand dollars depending on how far rates have moved since you fixed. Your lender will provide a break cost estimate on request, and this figure should be weighed against any potential savings from refinancing.

Refinancing After the Sale Instead

If you're buying again after you sell, refinancing your next purchase gives you access to the full range of current loan features and rates without paying twice for discharge fees.

You'll start with a clean structure, and you can tailor the loan to suit your new property and circumstances. For defence members buying closer to base or relocating to another state, this is the point to review offset accounts, redraw facilities, and loan splits. Refinancing after the sale also removes the risk of being locked into a clawback period if your sale timeline shifts unexpectedly.

Most lenders offer stronger incentives for new purchases than they do for refinances, particularly for defence members using no LMI loans. Cashback offers, fee waivers, and rate discounts are typically more attractive on purchase loans than on refinances, and you won't be constrained by the equity or valuation of a property you're about to sell.

If you're considering refinancing before selling, the decision comes down to timing and cost recovery. If your sale is more than 12 months away and your current rate is uncompetitive, refinancing now can deliver savings that outweigh the setup costs. If your sale is likely within six months, the costs exceed the benefits. Call one of our team or book an appointment at a time that works for you to review your loan structure and confirm the most cost-effective approach for your situation.

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