Top tips to refinance before selling your property

Why you'd refinance a property you're about to sell

Refinancing before selling makes sense when you need to access equity, reduce debt, or improve your borrowing position for the next home. Some sellers refinance to pull cash out for a deposit on their next property, while others switch to a loan with lower fees or a discharge process that suits a faster settlement.

The decision depends on what happens after the sale. If you're buying another property straight away, the equity you release now can fund a deposit without waiting for settlement. If you're consolidating debt or paying down the loan amount, a lower rate can reduce what you owe before the property changes hands.

Accessing equity without waiting for settlement

Most buyers need a deposit before they can make an offer. If your equity is tied up in your current home, you can refinance to release that equity as cash, then use it to secure the next property while your sale is still processing.

Consider a homeowner in Canning Vale with a property valued at around $650,000 and a loan balance of $350,000. They want to buy their next home before selling, but they don't have enough cash on hand for a deposit. By refinancing and accessing $80,000 in equity, they can put down a deposit on the new place and settle both transactions in the same month. The refinance gives them control over timing without needing a bridging loan or waiting for their sale to complete.

Lenders will typically allow you to borrow up to 80% of your property's value without paying mortgage insurance. Above that threshold, you'll need to factor in additional costs. If you're planning to sell within a few months, the equity release needs to make financial sense after you account for refinance fees and any rate differences.

Reducing what you owe before the sale completes

If you're selling and not buying again immediately, refinancing to a lower rate can reduce the loan balance before settlement. Every month you're paying interest on the existing loan, and switching to a lower rate means more of your repayment goes toward the principal.

This approach works when you're stuck on a high rate and you know the sale will take several months to complete. The savings from a lower rate can offset the cost of refinancing, especially if your current lender charges high ongoing fees or has already moved you to a higher variable rate after a fixed period ended.

Discharge fees and timing

Every lender charges a discharge fee when you close a loan, and some charge more than others. If you're refinancing before selling, you'll pay discharge fees twice: once when you refinance, and again when the property sells and the new loan closes.

Discharge fees typically range from $150 to $400 per loan, depending on the lender. Some lenders also charge break costs if you're exiting a fixed rate early. Before refinancing, check what your current lender will charge to discharge the loan, then check what your new lender will charge when the property sells. If the total cost is more than the benefit you're gaining from the refinance, it may not be worth proceeding.

Timing matters as well. Most refinance applications take two to four weeks to settle, depending on the lender and whether a new valuation is required. If you're already close to listing, the refinance needs to complete before the sale settles, or you'll be locked into the new loan after the property changes hands.

When refinancing doesn't make sense

Refinancing before selling isn't always the right move. If you're listing within a few weeks and you don't need to access equity, the cost and effort of refinancing will outweigh any short-term savings. The same applies if your current loan has low fees, no early exit penalties, and a rate that's close to what you'd get elsewhere.

If you're unsure whether your current loan is costing you more than it should, a loan health check can clarify whether switching now will actually save you money or give you the access you need before the sale completes.

How the application process differs

Lenders assess refinance applications the same way they assess new home loans. You'll need to provide income documents, details of your current loan, and a recent property valuation. The difference is that lenders know you're planning to sell, so they'll want to understand your exit strategy.

Some lenders are comfortable refinancing a property that's about to be listed. Others will decline the application if they believe the loan won't remain active long enough to be profitable. If you're upfront about your plans, you can avoid wasting time with lenders who won't proceed.

If you're refinancing to access equity for a deposit, the lender will also assess your ability to service both loans temporarily, even if you plan to discharge the original loan once the sale completes. Your broker can structure the application so it reflects your actual financial position without overstating risk.

Using equity to fund the next purchase

If you're buying before selling, releasing equity through a refinance gives you access to cash without needing a bridging loan. Bridging finance is expensive and often comes with higher rates and stricter terms. Refinancing into a standard variable or fixed loan gives you the same access to funds at a lower cost.

The refinance needs to settle before you make an offer on the next property, so timing is tight. You'll also need to show the lender that you can afford both loans until the sale completes. If the numbers don't stack up, the lender may decline the application or offer a lower loan amount.

What to check before you apply

Before you refinance, confirm your property's current value. If the market has moved since you last checked, your equity position may have changed. You can request a desktop valuation from your current lender, or your broker can arrange one as part of the refinance process.

You should also check whether your current loan has any exit penalties or conditions that make refinancing more expensive. If you're still within a fixed rate period, break costs could be substantial. If your fixed rate has already ended and you've moved to a variable rate, those costs won't apply.

Finally, review what you're trying to achieve. If the goal is to access equity, make sure the amount you're releasing justifies the cost of refinancing. If the goal is to reduce your loan balance, check that the rate difference and loan term will deliver actual savings before the property sells.

If you're weighing up whether to refinance your home loan before listing or waiting until after the sale, we can walk through the numbers with you and work out what makes sense for your situation. Call one of our team or book an appointment at a time that works for you.

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