A Victorian Investor's Guide to Refinancing in 2026

In my last article, we talked about Victoria's stacking property taxes — the new negative gearing changes, the land tax blow-up, and what investors can still do.

The most common follow-up question I got? "Should I refinance?"

It's a fair question. And like most good financial questions, the honest answer is: it depends.

But let me break it down in plain English — with real examples — so you can make an informed decision, not just a reactive one.

Think of this as the coffee-table conversation your banker will never have with you.

## First: What Is Refinancing? (Start From Zero)

Refinancing simply means swapping your existing home loan for a new one — either with a different bank, or sometimes with your existing lender on better terms.

You're not selling the property. You're not changing ownership. You're just replacing the debt.

It's like trading in your old phone plan because a better deal came along. Same phone (property). New deal (loan). When you refinance, your new lender pays out your old lender, and from that day forward you make repayments to the new one.

Why Do People Refinance? The 6 Most Common Reasons

### Reason 1: To Get a Lower Interest Rate

This is the most common reason — and often the most impactful.

Example: Sarah has a $600,000 investment loan at 6.65% (the rate her bank quietly left her on after the initial "honeymoon" period ended). The average competitive rate in 2026 is sitting around 5.89–6.0%. That 0.75% gap costs her roughly $4,500 a year in extra interest.

Over 10 years — even accounting for refinancing costs — that's $45,000 she didn't have to pay.

The rule of thumb: if your rate is 0.5% or more above what a new borrower with your profile would be offered today, it's worth looking.

### Reason 2: To Access Equity (Unlock Cash From Your Property)

Every year you own a property and make repayments, you build equity — the gap between what the property is worth and what you owe.

Example: Daniel bought an investment property in Footscray in 2020 for $520,000. It's now worth $780,000. He owes $380,000. His equity is $400,000. By refinancing, he can access up to 80% of the property's value ($624,000) minus his current debt ($380,000) = $244,000 in usable equity.

That equity can be used as a deposit on a new build investment property — and keep in mind, new builds still retain full negative gearing under the 2026 budget rules.

### Reason 3: To Fund a New Build Investment (While Tax Rules Still Allow It)

This is the most strategically relevant reason right now, post-budget. As we covered last time, new builds are exempt from the negative gearing abolition. That means if you already own an established property and want to keep building your portfolio with tax advantages intact, refinancing your existing property to release equity — rather than selling it — lets you fund a new build deposit without losing your grandfathered status on your current property.

You protect the old. You build the new.

### Reason 4: To Restructure Loans for Better Tax Outcomes

This one matters especially post-budget. When you refinance, you have the opportunity to split your loan properly — creating separate accounts for investment vs personal use.

This is critical because the ATO closely examines how borrowed funds are used. If you've mixed personal and investment borrowings in one account over the years, refinancing gives you a clean slate to structure things correctly.

For Victorian investors juggling multiple properties, a broker-led restructure at refinancing can also clarify which interest is deductible, reduce your audit risk, and ensure your tax position is airtight given the new rules.

### Reason 5: To Consolidate Debt

If you're carrying high-interest debt — credit cards at 20%+, personal loans at 12% — rolling them into a home loan at 6% can reduce your monthly outgoings significantly.

Warning: This only works if you change the behaviour that created the debt. Rolling $30,000 of credit card debt into your mortgage at 6% over 30 years will actually cost you more in total interest unless you pay it down aggressively.

More on the dangers below.

### Reason 6: To Improve Loan Features

Not all home loans are equal. Some have offset accounts (where your savings reduce the interest you pay daily). Some have redraw facilities. Some allow extra repayments without penalties.

If your current loan lacks these features — and you're on a competitive rate — refinancing to a product with an offset account alone can save thousands per year in interest on a large loan.

## The Negative Gearing Connection:

Why Refinancing Matters More Right Now

Here's the part most people miss when they think about refinancing post-budget. Your existing investment property is grandfathered — you keep negative gearing for as long as you hold it. That grandfathered status is extraordinarily valuable right now, because it's gone forever the moment you sell.

So the smart play for most Victorian investors is:

1. Don't sell your existing grandfathered investment property

2. Refinance to release equity from it

3. Use that equity as a deposit for a new build (which also retains full negative gearing)

4. Keep two assets — one grandfathered established property, one tax-advantaged new build This is a refinancing strategy, not just a rate chase.

Example: Lisa owns a townhouse in Preston worth $850,000 with a $420,000 mortgage. She wants to invest again but doesn't want to sell her existing property (which would cost her CGT + the grandfathered negative gearing). By refinancing to 80% LVR, she can release up to $260,000 in equity ($680,000 - $420,000). That becomes the deposit for a $780,000 off-the-plan apartment in Melbourne's inner north — a qualifying new build that keeps all the old tax rules.

Lisa has gone from 1 property to 2, paid zero CGT, and kept both her grandfathered negative gearing AND her new build tax advantages. The only "cost" is the refinancing process.

## What Does Refinancing Cost? (The Numbers)

This is the part that puts people off — but the costs are lower than most people assume:

Fixed rate break fees are the expensive wildcard. If you're on a fixed rate loan and break it early, the lender can charge you their cost of loss — which can run into tens of thousands on large loans in a rate-falling environment. Always check what you're on before refinancing.

The break-even calculation: If refinancing saves you $400/month and costs you $2,000 upfront — you've broken even in 5 months. After that, every month is a win.

Cashback deals: Many lenders are actively competing for your loan right now. ME Bank, BOQ, Greater Bank, IMB, and others are offering cashback deals of $2,000–$5,000 to refinancers in 2026 — which can more than cover your refinancing costs if you qualify.

When Should You NOT Refinance?

Refinancing is not always the right move. Here are the situations where staying put is smarter:

1. You're on a fixed rate with a large break cost If you locked in at 2021-era rates and break now, the fee could wipe out years of savings. Check your break cost before starting any application.

2. You just settled your loan (less than 12 months ago) Lenders and credit agencies look at how recently you settled. Multiple applications in a short window can ding your credit score. Wait until you've been in your loan for at least 12 months.

3. Your LVR is above 80% If you owe more than 80% of your property's value, you'll likely face Lender's Mortgage Insurance (LMI) charges when refinancing — which can run to several thousand dollars and wipe out any rate saving. Build equity first.

4. You're selling in the next 12–24 months The break-even point on refinancing is typically 6–12 months. If you're planning to sell, you may never recoup the refinancing costs. Hold off.

5. Your income has dropped or your financial position is shakier Refinancing is a new loan application — the new lender will assess your income, expenses, and debts. If you've gone from full-time to casual employment, had a business income drop, or taken on new debts, your borrowing capacity may have decreased and the application could be declined, adding a "declined" enquiry to your credit file.

The Tax Trap People Miss When Refinancing

This one can bite you hard, especially if you're releasing equity.

The ATO doesn't care which bank your loan is with. It cares about what the money was used for.

If you refinance your investment property and release $150,000 in equity, then use that money to buy a car, renovate your home (principal place of residence), or take a holiday — none of that loan interest is tax deductible. The deductibility follows the purpose of the funds, not the security property.

The right way: If you're releasing equity to purchase another investment property — keep the equity portion as a separate loan split with its own account. That way your accountant and the ATO can clearly see: $X for investment (deductible interest), $Y for personal use (not deductible). Clean, clear, defensible.

The wrong way: Refinancing everything into one big blended loan, then drawing down for mixed purposes. Messy, risky, and a red flag in an ATO audit.

Step-by-Step: How Refinancing Actually Works

For those who've never done it before, here's the plain-English process:

Step 1 — Check your current rate and loan features Find out what you're on. Check your last statement or call your lender. Know your exact interest rate, loan type (fixed/variable), remaining fixed term if applicable, and whether you have offset or redraw.

Step 2 — Get your property valued Your equity depends on your property's current market value. Most brokers can arrange a bank valuation as part of the refinance process.

Step 3 — Talk to a broker (not just one bank) A broker compares dozens of lenders at once and knows which ones will approve your structure, at what rate, with what features. Going direct to one bank means you only see one option.

Step 4 — Application and approval Once you've chosen your new lender, the broker lodges your application. Depending on the lender, approval can come through in 2–5 business days.

Step 5 — Settlement Your new lender pays out your old lender. Your old mortgage is discharged. Repayments start with the new lender from settlement day. You typically don't need to do anything — the banks handle the transaction between themselves.

Total timeline: 3–6 weeks from decision to settlement, depending on complexity.

A Quick Reference: Should You Refinance?

The Bottom Line

In the post-budget environment, refinancing is less about chasing the lowest advertised rate and more about strategic positioning.

If you already own an investment property in Victoria, refinancing can help you protect what you have (keep the grandfathered status), access what you've built (equity), and fund your next move (new build) — all without triggering a sale, CGT, or loss of tax advantages.

But it's not a magic button. Done carelessly — wrong purpose, wrong timing, wrong structure — it can cost you money, complicate your tax position, and reduce your borrowing capacity.

If you're wondering whether a refinance makes sense for your specific situation, the best first step is a 20-minute strategy conversation. Drop a comment below or reach out directly — I'm happy to run through the numbers with you.

Tanuj Kapoor | Mortgage Broker | Jabsons Finance

Ex-Senior Manager QA & Automation | MBA | B.E. (Comp Sci)

Tanuj Kapoor is a credit representative (557159) of BLSSA Pty Ltd ACN 117 651 760 | Australian Credit Licence 391237.

Disclaimer: The information in this article is general in nature and does not take into account your personal objectives, financial situation or needs. It is not personal advice, credit advice, tax advice or legal advice, and is not a recommendation to enter into, refinance, or remain in any particular credit contract. Any figures, calculations, or projections shown are simplified examples for illustration only — they are not guarantees or forecasts, and actual outcomes will vary based on your circumstances and the lender's assessment. Before acting on any information here, you should consider whether it's appropriate for you and seek advice from a licensed mortgage broker, financial adviser, tax adviser, and/or solicitor. Lending policies, interest rates, and tax laws change over time and vary between lenders and states — always confirm current details before making a decision.