Common Mistakes When Refinancing Multiple Properties

Refinancing multiple properties requires a different approach to refinancing a single home. The decision to move several loans at once involves weighing the cumulative cost savings against the complexity of coordinating valuations, timing, and lender capacity across your entire portfolio.

Most investors who own multiple properties refinance to access a lower interest rate across their portfolio, consolidate loans with different lenders into a single relationship, or release equity from one property to fund the next purchase. The challenge is that each loan sits against a different security, and lenders assess your serviceability based on the combined debt and rental income from all properties. A mistake on one application can delay or derail the others.

Refinancing All Properties When Only Some Need It

Not every loan in your portfolio will benefit equally from a refinance. One property might be sitting on a high variable interest rate while another is already on a competitive fixed rate with 18 months remaining. Moving both loans at the same time means paying break costs on the fixed loan and potentially losing features you already have in place.

Consider an investor in Mandurah who owns three properties: a townhouse in Falcon on a variable rate of 6.5%, a unit in Halls Head with a fixed rate at 5.1% expiring in two years, and a house in Meadow Springs on a variable rate of 6.2%. Refinancing the Falcon and Meadow Springs properties to a variable rate of 5.8% would reduce monthly repayments without triggering break costs. The Halls Head unit should remain untouched until closer to the fixed rate expiry date. By isolating the refinance to two properties, the investor avoided unnecessary fees and preserved the existing low rate on the third.

Before moving forward, calculate whether the interest saved on each individual loan justifies the application and settlement costs for that specific property. A loan health check across your portfolio will identify which properties are costing you the most and which are performing adequately.

Underestimating How Lenders Assess Multiple Loans

Lenders do not assess each property in isolation. They calculate your total debt serviceability by adding up all loan repayments and comparing them to your income, including rental income from investment properties. Most lenders apply a rental income shading of 70% to 80%, meaning they only count a portion of the rent when determining how much you can borrow.

If you currently have loans split across different lenders, each lender only sees part of your debt picture when you originally applied. When you refinance multiple properties to a single lender, that lender now sees your full exposure. This can reduce your borrowing capacity compared to what you had when the loans were spread across three or four institutions. In some cases, investors discover they can no longer service all their loans under one lender, even though they have been making repayments without issue for years.

In our experience, this issue most commonly arises when investors try to consolidate all debt with one lender for simplicity. The solution is to keep loans split across two lenders or structure the refinance so that the lender with the highest serviceability buffer takes on the largest loan amounts. Your mortgage broker can model this before submitting applications to avoid a declined refinance that impacts your credit file.

Using a Single Valuation for Multiple Properties

Each property in your portfolio requires its own valuation when refinancing, and the outcome of one valuation can affect your ability to refinance another. Lenders will either send a valuer to inspect the property or rely on an automated valuation model depending on the loan amount and location. If a property in a regional area like Mandurah receives a lower-than-expected valuation, your equity position changes, and the lender may reduce the amount they are willing to lend against that security.

This becomes a problem when you were relying on a certain loan-to-value ratio to avoid lender's mortgage insurance or to release equity for another purpose. If the valuation on one property comes in under the purchase price or your expected current value, you may need to inject additional cash to proceed or accept a higher interest rate due to a higher LVR.

Mandurah's property market includes a mix of established homes near the canals and newer estates further inland. A valuer assessing a property in Silver Sands might compare it to recent sales in the immediate area, which can vary significantly depending on proximity to the ocean and the age of the property. Investors who purchased during a price peak may find that valuations have softened, particularly in areas with higher supply of similar stock. Before committing to a refinance across multiple properties, request an indicative desktop valuation from your broker to identify any potential shortfalls early.

Ignoring the Tax Implications of Debt Restructuring

Refinancing multiple investment properties can blur the line between deductible investment debt and non-deductible personal debt if not structured correctly. The Australian Taxation Office allows you to claim interest on borrowings used to purchase or improve an income-producing asset. If you refinance and increase the loan amount to access equity for personal use, that portion of the interest is no longer deductible.

Consider a scenario where an investor refinances an investment property to release equity and uses part of that equity to renovate their primary residence. The original loan balance remains deductible, but the additional amount drawn for the renovation is not. If the loans are not split at settlement, the entire interest bill becomes a mixed-purpose loan, and the investor must calculate the deductible portion manually each year. This creates unnecessary complexity and increases the risk of errors during tax time.

The solution is to structure the refinance so that any equity release for non-investment purposes is held in a separate loan split. Most lenders allow you to split a single mortgage into multiple accounts, each with its own balance and purpose. Your broker should work with your accountant before finalising the loan structure to confirm that the deductibility is preserved. Documentation showing the purpose of each loan split is essential if the ATO ever queries your deductions.

Timing the Refinance Around Settlement and Rental Income

When refinancing multiple properties, settlement dates do not always align. One property might settle within four weeks while another takes eight weeks due to valuation delays or lender processing times. During this period, you may be required to continue making repayments on your existing loans while also preparing to settle the new loans. This can create a short-term cashflow gap, particularly if your rental income is already committed to covering existing repayments.

Investors who rely on rental income to service their loans need to account for vacancy periods or lease expiry dates when planning a refinance. If a property in your portfolio is due for a lease renewal around the same time as settlement, the lender may require confirmation that the tenant has re-signed before proceeding. A gap in rental income, even for a few weeks, can affect your ability to meet the lender's serviceability criteria at the time of settlement.

Mandurah's rental market experiences seasonal variation, particularly in suburbs closer to the foreshore where short-term holiday demand can affect long-term rental availability. If you are refinancing a property in an area like Halls Head or Wannanup, factor in whether the property is currently tenanted and how long the lease has remaining. Lenders prefer to see at least six months remaining on a lease when assessing rental income for serviceability. If the lease is expiring soon, you may need to wait until a new tenant is secured before proceeding with the refinance application.

Moving Forward with a Portfolio Refinance

Refinancing multiple properties is rarely a one-size-fits-all process. Each loan should be assessed on its own merit, but the overall strategy must account for how the lender views your total debt position, how equity is distributed across your portfolio, and how the structure affects your tax position and cashflow.

Call one of our team or book an appointment at a time that works for you to review your portfolio and identify which properties should be refinanced now and which are optimal to leave in place.

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