What Lenders Check When You Apply to Refinance
Lenders assess your current income, existing loan balance, property value, and credit file. They treat a refinance application the same way they assess a new purchase, with full income verification and a fresh property valuation.
The difference is that you already own the property. That means the valuation reflects current market conditions, not the price you paid. If your property has increased in value since purchase, your loan-to-value ratio improves. If values have dropped or stayed flat, you may need to show stronger income or equity to qualify.
For ADF members posted to Singleton Military Area, lenders also factor in Defence-specific income like field allowance and separation allowance. Not all lenders recognise these loadings, so the choice of lender affects whether your full income is counted.
Income Requirements: What Counts and What Doesn't
You need to show that your current income can service the new loan at the lender's assessment rate, which sits above the actual interest rate you will pay. Most lenders use an assessment buffer of around 3% on top of the loan rate.
Base salary always counts. Allowances like CFTS, field pay, and rental allowance are recognised by some lenders but not all. If you rely on these to meet serviceability, the lender you choose becomes critical.
Consider a member posted to Singleton on a combination of base salary and field allowance. One lender might assess serviceability using only the base, while another includes the full package. That difference can affect whether you qualify for the rate or features you want.
If your income has dropped since your original loan, you may still qualify if your loan balance has reduced or your property value has increased. The key metric is whether your current debt-to-income and loan-to-value ratios sit within the lender's policy.
Property Valuation: Why It Matters More Than You Think
The lender orders a new valuation when you apply to refinance. That valuation determines your loan-to-value ratio, which in turn affects your rate, your ability to access equity, and whether you qualify at all.
If the valuation comes in lower than expected, you may need to contribute additional cash to meet the lender's maximum LVR. If it comes in higher, you may be able to access equity or avoid lender's mortgage insurance.
Singleton property values tend to move with posting cycles and resource sector activity. A valuation conducted during a period of high rental demand may differ from one completed when the area is quieter. Timing the refinance application to align with strong market conditions can make a material difference to the outcome.
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Credit File: What Lenders See and What Triggers Declines
Your credit file lists every credit application, repayment default, and account closure from the past five to seven years. Lenders review this file as part of the refinance assessment.
A clean file with no missed repayments and low credit card balances strengthens your application. Multiple recent credit inquiries, defaults over $150, or high utilisation on existing cards can trigger declines or higher rates.
If you have a default listed, some lenders will still consider your application once the default is paid and a period of clean conduct has passed. Others apply a blanket decline. Knowing which lenders assess case-by-case rather than applying automatic overlays allows you to target the right one from the start.
Before you apply, request a copy of your credit file from a reporting agency like Equifax or Illion. If there are errors or outdated defaults, have them corrected before the lender pulls the report.
Loan-to-Value Ratio and How It Affects Your Options
Your LVR is the loan amount divided by the property value, expressed as a percentage. The lower your LVR, the more refinancing options you have.
At 80% LVR or below, you avoid lender's mortgage insurance and access the widest range of lenders and rates. Between 80% and 90%, most lenders will still approve your application, but LMI applies unless you qualify for a Defence waiver. Above 90%, your options narrow significantly.
If your LVR sits above 80% and you want to avoid LMI, a no LMI loan structured for ADF members may allow you to refinance without the additional cost.
In a scenario where a member refinances a property valued at the current Singleton median with a remaining loan balance of 85% LVR, the ability to waive LMI saves several thousand dollars and keeps the refinance cost-neutral.
Existing Loan Conduct: Why Your Repayment History Counts
Lenders review how you have managed your current loan. If you have made every repayment on time for the past six to twelve months, your application is stronger. If you have missed payments or relied heavily on redraw or offset to cover shortfalls, lenders may apply additional scrutiny.
A history of consistent repayments signals that you can manage the loan you are applying for. Even if your credit file is otherwise clean, recent missed payments on your current mortgage can result in a decline.
If you have had genuine hardship due to deployment or posting, some lenders will consider your application with an explanation and evidence of resumed repayments. Others apply a strict conduct period before they will approve a refinance.
Debt-to-Income Ratio and Why It Limits Borrowing Power
Your total debt as a percentage of your gross income affects how much you can borrow and whether a lender will approve your refinance. Most lenders cap debt-to-income ratios at six times your annual income, though some apply lower limits.
If you carry high credit card limits, personal loans, or car finance, these reduce your available borrowing capacity even if the balances are low. Lenders assess based on the limit, not the amount owed.
Paying down or closing unused credit accounts before you apply can improve your debt-to-income ratio and increase your chances of approval. If you are planning to consolidate debt into your mortgage, the new loan amount must still sit within the lender's serviceability limits.
Employment Stability: How Lenders View ADF Careers
Permanent ADF members are generally viewed as stable employment. Lenders recognise the structured pay scale and job security that comes with Defence service.
If you are on a fixed-term contract or in a probationary period, some lenders may require additional documentation or apply a higher assessment rate. Reservists with irregular income may need to provide longer income history or tax returns to demonstrate consistent earnings.
Most lenders accept a recent payslip and employment letter for permanent members. If your circumstances are less standard, be prepared to provide additional verification.
When to Request a Loan Review Instead of a Full Refinance
If your current lender offers a retention rate that matches or comes close to what you would achieve by refinancing elsewhere, you can avoid the application process, valuation fee, and settlement costs.
Some members assume they need to switch lenders to access a lower rate, but a loan health check can reveal whether your existing lender will negotiate. If your loan conduct is strong and your LVR has improved, you may be able to secure a rate adjustment without a formal refinance.
A retention rate is not always available, and it is rarely advertised. You need to ask, and you need to know what rates are available elsewhere to negotiate effectively.
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Frequently Asked Questions
What income do lenders count when I apply to refinance?
Lenders assess your base salary and any allowances they recognise, such as field pay or CFTS. Not all lenders include Defence-specific allowances, so the lender you choose affects whether your full income is counted.
Does my property need to be revalued when I refinance?
Yes, the lender orders a new valuation to determine your current loan-to-value ratio. The valuation affects your rate, your ability to access equity, and whether you qualify for the refinance.
Can I refinance if my property value has dropped?
You can still refinance if your loan-to-value ratio remains within the lender's policy limits. If the valuation comes in lower than expected, you may need stronger income or additional equity to meet the lender's requirements.
What happens if I have a default on my credit file?
Some lenders will decline automatically, while others assess case-by-case once the default is paid and a period of clean conduct has passed. Knowing which lenders consider individual circumstances allows you to target the right application.
Do I need to refinance to get a lower rate?
Not always. If your current lender offers a retention rate that matches what you would achieve elsewhere, you can avoid the application process and settlement costs. A loan review can reveal whether your lender will negotiate.
