Self-employed borrowers often stay on their existing rate longer than they should because they assume refinancing will be harder the second time around.
The reality is different. When you refinance to secure a lower interest rate, lenders assess your current financial position, not the one you had when you first applied. If your business has stabilised or your income structure has improved, you may now qualify for rates you couldn't access previously. The key difference is in how you present your income and how thoroughly you prepare your documentation.
Why Self-Employed Borrowers Refinance to Lower Rates
Refinancing for a lower rate makes sense when the gap between your current rate and what's available now is wide enough to justify the application effort and any associated costs. For self-employed borrowers, this typically means a difference of 0.30% or more.
Consider a business owner in the Inner West carrying a loan of $800,000 at 6.50% who could refinance to 6.00%. Over a remaining loan term of 25 years, that shift would reduce monthly repayments by around $340. The application itself involves updated financials, two years of tax returns, and recent BAS statements, but the ongoing saving justifies the upfront effort. In our experience, self-employed clients who've been on the same loan for three or more years often find their circumstances have changed enough to access better pricing, particularly if they've reduced business debt or restructured their income.
When to Review Your Home Loan
A loan health check should occur every two to three years, or when your fixed rate period is ending. Rates move frequently, and lenders adjust their pricing based on funding costs and competitive positioning.
For self-employed borrowers, timing also depends on your most recent tax return. If your latest return shows stronger income than the previous year, that becomes the basis for a new application. Waiting until after lodgement gives you a clearer picture of what you can demonstrate to lenders. Some lenders will also consider your year-to-date profit and loss statement if it shows consistent or improved performance, which can be useful if you're refinancing mid-financial year.
How Lenders Assess Self-Employed Income When Refinancing
Lenders calculate your income using your most recent two years of tax returns, focusing on your taxable income plus any add-backs such as depreciation. Each lender applies a different formula, and some will average the two years while others take the most recent year only.
As an example, a Sydney-based consultant lodged returns showing taxable income of $95,000 in the first year and $115,000 in the second. One lender averaged the two years and assessed income at $105,000. Another lender took the most recent year at $115,000 and included depreciation add-backs of $8,000, bringing the assessed income to $123,000. The second lender's approach resulted in approval for a lower rate product that required a loan-to-value ratio below 70%. The property had been revalued slightly higher than the original purchase price, which also helped meet the threshold. Understanding which lender will assess your income most favourably is central to securing the lowest available rate.
What Documentation You'll Need for a Refinance Application
You'll need two years of full tax returns including notices of assessment, your most recent BAS statements, and a current profit and loss statement if you're mid-year. Lenders will also request six months of business bank statements and personal transaction statements.
If your business structure has changed since your original loan, such as moving from sole trader to a company or trust, you'll need to show continuity of income across the structure. Some lenders accept accountant-prepared declarations to bridge this, while others require ABN history and business registration documents. The more organised your records, the faster the turnaround and the sooner you can lock in the lower rate.
Fixed vs Variable: Choosing the Right Product When You Refinance
When refinancing your mortgage, you'll need to decide whether to move to a variable rate, lock in a fixed term, or split the loan across both. Variable rates give you access to offset accounts and the flexibility to make extra repayments without penalty.
Fixed rates provide repayment certainty but limit your ability to pay down the loan faster. For self-employed borrowers with fluctuating income, a split structure often works well. You can fix a portion to cover your minimum repayments and keep the remainder variable with an offset account to park surplus cash from strong trading months. That approach balances predictability with cashflow management, which matters when your income varies quarter to quarter.
Costs Involved in Refinancing and How to Factor Them In
Refinancing typically involves a discharge fee from your current lender, application or establishment fees with the new lender, and valuation costs. Government charges such as registration fees also apply.
These costs usually total between $1,500 and $3,000, depending on the lender and the loan amount. Some lenders will capitalise these costs into the new loan, which means you don't pay them upfront but you do pay interest on them over time. Others waive application fees as part of a refinance offer. The calculation that matters is how long it takes for your interest savings to outweigh the upfront and capitalised costs. If you're saving $340 per month and total costs are $2,500, the break-even point is around seven months. Beyond that, the saving is genuine.
Using Equity Release Alongside a Rate Refinance
If your property has increased in value since you purchased, refinancing also gives you the opportunity to access equity for other purposes such as investing in another property or funding business growth. Lenders will reassess your property's current value as part of the refinance process.
For self-employed borrowers, this is often where refinancing becomes more strategic than simply chasing a lower rate. You may be able to reduce your interest rate and release equity simultaneously, provided your income supports the higher loan amount and your loan-to-value ratio remains within the lender's policy. That equity can then be directed toward income-generating assets, which may improve your overall financial position and make future refinancing even more accessible.
What Happens If Your Property Value Has Dropped
If your property has declined in value or remained flat, you may not qualify for the lowest advertised rates, which are typically reserved for borrowers with loan-to-value ratios below 80%. Some lenders will still refinance you at a higher rate tier, while others may decline the application.
In this situation, it's worth comparing whether the rate you can access through refinancing still represents a saving over your current loan. If the gap is narrow and costs are high, staying put and making extra repayments may be the more practical option until your loan balance reduces or the property value recovers. A home loan health check will show you exactly where you sit and whether refinancing is worth pursuing now or in six to twelve months.
How Long the Refinance Process Takes for Self-Employed Borrowers
From application to settlement, refinancing typically takes four to six weeks for self-employed borrowers. The timeline depends on how quickly you can provide documentation, how long the lender takes to assess your income, and whether the valuation comes back in line with expectations.
Some lenders have dedicated self-employed assessment teams, which speeds up the process. Others treat every application the same way, which can add delays if your income structure is complex. Working with a broker who understands how different lenders assess self-employed income shortens the timeline because the application is structured correctly from the start and sent to a lender who is likely to approve it without multiple rounds of clarification.
Refinancing to access a lower interest rate is one of the most direct ways to reduce your loan costs, particularly if you've been on the same rate for several years. For self-employed borrowers, the process requires more documentation and a clear understanding of how lenders assess your income, but the outcome can be significant when your circumstances support it. Call one of our team or book an appointment at a time that works for you.
Frequently Asked Questions
How much can I save by refinancing to a lower interest rate?
The saving depends on the rate difference and your loan amount. A 0.50% reduction on an $800,000 loan can save around $340 per month. You need to compare this saving against refinancing costs to determine the break-even point.
Do I need two full years of tax returns to refinance?
Yes, most lenders require two years of full tax returns with notices of assessment. Some lenders will also consider your current year profit and loss statement if it shows consistent or improved income.
Can I refinance if my property value has stayed the same?
Yes, but you may not qualify for the lowest advertised rates if your loan-to-value ratio is above 80%. Some lenders will still refinance you at a higher rate tier, which may still represent a saving over your current loan.
Should I fix or stay variable when I refinance?
Variable rates offer flexibility and offset account access, while fixed rates provide repayment certainty. For self-employed borrowers with fluctuating income, a split structure often works well to balance predictability with cashflow management.
How long does refinancing take for self-employed borrowers?
The process typically takes four to six weeks from application to settlement. The timeline depends on how quickly you provide documentation and how long the lender takes to assess your income and complete the property valuation.
