Do you know how refinancing approval actually works?

Refinancing approval works the same way as your original home loan approval, except lenders now have your repayment history to look at.

You lodge an application, the lender checks your income and expenses, values the property, runs a credit check, and decides whether the numbers stack up. For plasterers running your own business or working as a subbie, the income part is where most refinance applications hit friction. Lenders treat self-employed income differently to PAYG income, and if your last two years of tax returns show inconsistent profit or you've claimed heavy deductions, expect questions.

The difference between refinancing and your first loan is that your existing lender already knows you. If you've been making payments without issue for three years, another lender sees that as proof you can service a mortgage. If you've missed payments or gone into arrears, that history follows you and makes approval harder, regardless of how solid your income looks now.

Why lenders assess plasterers differently

Lenders assess self-employed plasterers using tax returns and business financials, not payslips. Most want two full years of lodged tax returns, and they'll average your net profit across those two years to work out your income. If your most recent year shows a drop compared to the year before, some lenders won't average it. They'll use the lower figure or decline the application outright.

Consider a plasterer who earned $95,000 net profit one year and $68,000 the next after claiming a new ute and tools. A lender might average that to $81,500, or they might only use $68,000 depending on their policy. That difference changes how much you can borrow and whether your refinance application gets approved. If you're coming up to a fixed rate expiry and need to move lenders, timing your application after a solid financial year makes a measurable difference.

What happens during a refinance assessment

The lender orders a valuation, pulls your credit file, checks your income, and calculates your living expenses. They also look at your current loan balance and any other debts like car loans, credit cards, or business overdrafts. If your property value has dropped since you bought it, or if you've taken out additional debt, your equity position might not support the refinance.

Valuations can come in under what you expect, especially if you're in an area where prices have softened or if your property needs work. Lenders won't refinance if the loan-to-value ratio exceeds their limits. If you borrowed 90% originally and the property value has stayed flat, you might still be sitting at 85% LVR after a few years of repayments. Some lenders won't touch anything above 80% without lenders mortgage insurance, and if you're refinancing, you'll be slugged with LMI again unless you can get the LVR under that threshold.

Expenses get recalculated using the Household Expenditure Measure, which is usually higher than your actual spending. Lenders don't care what you say you spend. They use a benchmark figure based on your family size and income. If your income barely covers the HEM plus your new loan repayment, the application gets knocked back even if you've been managing fine on your current loan.

How long does refinance approval take

Most refinance approvals take two to four weeks if your paperwork is in order. If you're self-employed, add another week for the lender to review your tax returns and business financials. If the valuation comes in low or if the lender asks for more documents, add another week or two.

Some lenders are slower than others. The big four banks have more layers of approval, while smaller lenders and non-bank lenders often turn applications around quicker. If you're refinancing to access equity or to lock in a lower rate before your fixed term ends, start the process at least six weeks out from when you need it done.

The documentation lenders want to see

Lenders ask for two years of tax returns with notices of assessment, business bank statements for the last three to six months, and personal bank statements covering the same period. They'll also want proof of identity, a rates notice or ownership documents for the property, and details of your current loan.

If you've recently lodged a tax return but haven't received the notice of assessment yet, most lenders won't process the application until it arrives. If your accountant is slow or if the ATO is backlogged, that delay becomes your delay. Some lenders accept accountant-prepared financials in place of a notice of assessment, but not all of them, and you'll need a letter from your accountant confirming the return has been lodged.

For plasterers who run a company or trust structure, lenders also want company financials, trust deeds, and sometimes director guarantees. The more complex your business structure, the longer the assessment takes and the more paperwork you'll need to provide.

When refinancing gets declined

Applications get declined when your income doesn't support the loan amount, when your credit file shows defaults or missed payments, or when the property valuation comes in too low. They also get knocked back if you've changed jobs recently, if your business is less than two years old, or if your expenses exceed the lender's serviceability limits.

If you've applied for multiple loans or credit cards in the last six months, that shows up on your credit file and raises questions. Lenders assume you're taking on more debt, even if those applications were declined or you didn't proceed. Too many credit enquiries in a short period can be enough to tip an application from conditional approval to decline.

In some cases, one lender will decline the same application another lender approves. Different lenders have different serviceability calculators, different policies on how they treat self-employed income, and different risk appetites. If your application gets declined, it's worth understanding why before you apply elsewhere, because a second decline makes the third application harder.

What conditional approval actually means

Conditional approval means the lender is willing to proceed, but only if you meet certain conditions. Those conditions usually include a satisfactory valuation, proof of insurance, and final verification of your income and employment. It's not a guarantee, and the approval can still be withdrawn if something changes or if the conditions aren't met.

For plasterers, conditional approval often comes with a condition around income verification. The lender might approve the loan based on your tax returns, but then ask for updated bank statements or a letter from your accountant confirming your income hasn't dropped. If your recent months show a downturn, that can be enough to pull the approval.

Valuation is the other common condition that derails applications. If the property values at $50,000 less than you expected, your LVR blows out and the lender either declines or asks you to reduce the loan amount. That's less of an issue if you're just switching lenders, but if you were planning to access equity or consolidate debt, a low valuation kills that plan.

Moving from conditional to unconditional approval

You move from conditional to unconditional by submitting whatever the lender has asked for and waiting for them to tick it off. Once all conditions are met and the lender's credit team signs off, you get unconditional approval and the loan moves to settlement.

Settlement usually happens four to six weeks after unconditional approval, but it can be faster if you're just refinancing with no other complications. Your current lender gets a payout figure, the new lender organises the transfer, and the loans swap over. You don't need to do much at that point except make sure your income keeps hitting your bank account and you don't take on any new debt before settlement.

If you're refinancing to consolidate other debts into your mortgage, those debts need to be paid out at settlement. The lender will hold back enough from the loan amount to clear those debts directly, and you'll get whatever is left over. If you were counting on cash in hand and the lender pays your debts directly instead, make sure you know which debts are being cleared and which ones you're still responsible for.

Refinancing approval isn't harder than getting your first loan, but it's not automatic either. If your income has dropped, your debts have increased, or your property value has stalled, the outcome might not be what you expect. Call one of our team or book an appointment at a time that works for you.

Frequently Asked Questions