Refinancing at the wrong time can cost you more than staying put, particularly when you're running a business and your income doesn't fit the neat boxes lenders prefer.
As a sole trader in Sydney, you're working with a different set of timing considerations than someone on a salary. Your income documentation takes longer to prepare, your tax returns might show deductions that reduce your borrowing capacity, and a rate difference that looks attractive on paper might not justify the effort once you factor in the time and cost of gathering two years of financials, updated ABN statements, and lender-specific documents. The decision to refinance isn't just about whether a lower rate exists—it's about whether the benefit outweighs the friction involved in proving your income all over again.
Fixed Rate Period Ending: Timing the Switch Before It Happens
The moment to act is three to four months before your fixed rate expires, not after.
Most sole traders coming off a fixed rate wait until the switch happens and then contact a broker once they see the new repayment amount. By that point, you're already on your lender's revert rate, and the clock is working against you. Lenders need time to assess your income, and if your most recent tax return shows lower profit due to legitimate business deductions or reinvestment, you might need to provide additional evidence of your capacity to service the loan. Starting the refinance application early means you can lock in a new rate before the fixed period ends, avoid even one month at the revert rate, and give yourself time to address any documentation issues without pressure.
Consider a sole trader who runs a consultancy in the Inner West. Their fixed rate ended in March, reverting them to 6.8%. They didn't start the refinance process until May, and by the time they gathered their tax returns, profit and loss statements, and had their accountant prepare a letter explaining a one-off deduction, it was July. They spent four months paying an extra 1.3% in interest on a loan of $620,000—roughly $2,700 that wouldn't have been lost if the process had started in December.
When Your Income Has Dropped: Whether Refinancing Still Makes Sense
If your last financial year shows a drop in net profit, refinancing might still be possible but requires a different approach.
Lenders assess sole trader income using the most recent two years of tax returns, and most will average those figures or take the lower of the two. If your income dropped because of legitimate business reasons—such as taking time off, investing in equipment, or shifting your business model—some lenders will accept a letter from your accountant explaining the context and projecting future income. Others won't. The question isn't whether you should refinance, but whether you can, and whether the rate saving justifies the risk of a declined application that then sits on your credit file.
In our experience, sole traders who've had a strong year followed by a weaker one often assume they're locked out of refinancing entirely. That's not always the case, but it does mean working with a broker who knows which lenders will consider explanatory letters and which won't waste your time.
Access Equity for Investment: The Refinance That Funds the Next Property
Refinancing to release equity works well for sole traders only if your income can support the higher loan amount.
If you're planning to access equity from your home to fund a deposit on an investment property, lenders will assess your capacity to service both the increased home loan and the new investment loan simultaneously. That means your declared income needs to cover both, and for sole traders, that income figure is net profit after deductions—not revenue. If your taxable income sits at $85,000 after you've claimed every legitimate deduction, that's the figure the lender uses, and it might not stretch far enough to support both loans, even if your actual cashflow is comfortable.
A scenario we regularly see involves a sole trader in the Eastern Suburbs who wanted to access $150,000 in equity to buy an investment unit. Their taxable income was $78,000, but their actual drawings and retained profit were closer to $110,000. The first lender declined the application. The second lender accepted it after their accountant provided a profit and loss statement showing consistent monthly income and a letter confirming that deductions were discretionary. The loan was approved, but the process took eight weeks and required documentation most salaried buyers never touch.
Consolidate Into Mortgage: When Debt Consolidation Actually Improves Cashflow
Consolidating business debts into your home loan can reduce your monthly repayments, but only if the interest saving outweighs the cost of converting unsecured debt into secured debt.
If you're carrying an equipment loan at 8%, a car loan at 7.5%, and a business overdraft at 9%, rolling them into a home loan at 6.2% will reduce your interest cost and simplify your repayments. But it also means those debts are now secured against your property, and if your business income becomes unstable, you're risking your home to cover obligations that were previously unsecured. The decision to consolidate should be based on whether your cashflow genuinely improves and whether the debt being consolidated was short-term or structural.
We regularly see this work well for sole traders who took on equipment finance or vehicle loans during the early years of their business and are now in a position to absorb that debt into their mortgage at a lower rate. It works less well when the debt being consolidated is ongoing business expenses that should be funded from revenue, not equity.
Loan Health Check: The Review That Catches What You've Stopped Noticing
A loan health check every two to three years will tell you whether your current loan still fits your circumstances or whether you've been paying for features you no longer use.
Sole traders often set up their home loan during the early years of their business, when offset accounts and redraw facilities felt essential. A few years later, the business is profitable, the offset account sits empty because cashflow has improved, and you're paying a higher rate for features that no longer add value. A loan review doesn't always lead to refinancing—sometimes it confirms you're in the right product—but it's the only way to know whether your loan still matches your current financial structure.
Call one of our team or book an appointment at a time that works for you. We'll walk through your current loan, your income documentation, and whether refinancing makes sense given where your business sits right now.
Frequently Asked Questions
When should I start refinancing if my fixed rate is ending?
Start the refinance process three to four months before your fixed rate expires. This gives lenders time to assess your income and allows you to lock in a new rate before reverting to a higher variable rate.
Can I refinance if my income has dropped in the last financial year?
Refinancing is still possible if your income has dropped, but it depends on the lender and whether your accountant can provide a letter explaining the context. Some lenders will accept explanatory documentation, while others will only use your tax return figures.
How does accessing equity work when refinancing as a sole trader?
To access equity, lenders assess whether your income can service both the increased home loan and any new loan you're taking out. Your net profit after deductions is the income figure used, so your taxable income needs to support the higher loan amount.
Is consolidating business debts into my mortgage a good idea?
Consolidating debts can reduce monthly repayments and interest costs, but it converts unsecured debt into debt secured against your property. It works well for equipment or vehicle loans but less so for ongoing business expenses that should be funded from revenue.
How often should I review my home loan as a sole trader?
A loan health check every two to three years helps identify whether your loan still fits your circumstances or whether you're paying for features you no longer use. It doesn't always lead to refinancing but confirms whether your current loan matches your financial situation.
