What Not to Do: Refinancing Right Before You Sell

Refinancing to secure a lower rate makes sense when you're staying put for a few more years.

It rarely makes sense when you're already planning your next move. The moment you list or make an offer on another property, the maths behind refinancing changes completely. Break costs, application fees, and discharge fees stack up against a timeline too short to recover them, and you risk delaying settlement on both sides.

When Refinancing Before a Sale Creates More Problems Than It Solves

Refinancing before selling introduces costs that only pay off if you hold the new loan long enough to recover them. The application fees, valuation costs, and legal work associated with a refinance application typically total between $1,500 and $3,000. If you're coming off a fixed rate period, the break costs can add another few thousand dollars depending on how much time remains on the term and where rates have moved since you locked in. Discharge fees from your current lender, settlement fees from your new lender, and registration of a new mortgage add another few hundred dollars.

Consider a borrower in Bundoora who refinances a loan in September and lists their property in November. They've paid roughly $2,800 in upfront costs, saved perhaps $150 per month in repayments at a lower rate, and then discharged the new loan at settlement two months later. They've recovered $300 in interest savings against $2,800 in costs. The only scenario where this makes sense is if the refinance unlocked equity needed for a deposit on the next property. Otherwise, it's a loss.

Accessing Equity Without Refinancing the Entire Loan

If you need to release equity from your current property to fund the purchase of your next one, refinancing is not the only option.

A bridging loan allows you to access equity in your existing property before it settles, without switching lenders or paying break costs on a fixed rate loan. The bridging lender provides short-term funding secured against both the property you're selling and the property you're buying. You carry both loans for a few weeks or months until your sale settles, at which point the bridging loan is repaid in full. Interest is capitalised, so there are no monthly repayments during the bridging period. The cost is higher than a standard variable rate, but the loan only runs for the period between your purchase settlement and your sale settlement.

Another option is a top-up on your current loan. Some lenders will increase your existing loan limit without a full refinance application, provided your property has increased in value and your income supports the higher borrowing. This avoids discharge fees, new application costs, and the need to register a new mortgage. You're borrowing more on the same loan rather than switching lenders. Not all lenders offer this, and the terms depend on your current loan contract, but it's worth asking before committing to a full refinance process.

Fixed Rate Break Costs and Why Timing Matters

Break costs apply when you repay a fixed rate loan before the end of the fixed term. The formula used to calculate them depends on the difference between the rate you locked in and the rate your lender can now lend that money at for the remaining term. If rates have fallen since you fixed, the lender is losing income and will charge you to make up the difference. If rates have risen, the break cost is usually zero because the lender can redeploy your funds at a higher rate.

In our experience, borrowers underestimate how large these costs can be. A four-year fixed loan taken out when rates were at their lowest, with two years still remaining, can carry a break cost of $8,000 to $15,000 depending on the loan size. If you refinance that loan six months before selling, you've paid the break cost to your old lender, paid application and settlement fees to your new lender, and then discharged the new loan a few months later. You've spent those thousands without recovering them.

If your fixed rate period is ending within the next few months and you're planning to sell within the next 12 months, the break cost is either small or non-existent. In that scenario, refinancing may still make sense if it unlocks equity or delivers a rate low enough to recover the costs before you sell. Outside that window, you're better off staying put.

What Works Instead: Structuring Your Next Purchase Around Your Current Loan

Rather than refinancing before you sell, structure your next purchase so that your current loan continues until your sale settles. You can do this with a bridging loan, as outlined earlier, or by negotiating a longer settlement on your purchase to align with the expected settlement of your sale. Buyers in Bundoora often have the flexibility to negotiate settlement terms, particularly when dealing with established homes rather than off-the-plan apartments.

Another option is to keep your existing loan in place, purchase your next property with a separate loan from a different lender, and repay the first loan when your sale settles. This works when your income and deposit support the temporary holding of both loans. Lenders assess your borrowing capacity based on your ability to service both loans simultaneously, so you'll need enough income buffer to qualify. Once your sale settles, you repay the old loan and continue with the new one.

If you're upgrading your house and your current property is in an area with strong demand like Bundoora, where the median house price sits around $880,000 to $905,000, you may have enough equity to carry both properties for a short period without needing a bridging loan at all. The key is timing your contracts so that your purchase settlement occurs after your sale settlement, or close enough that your income can support the overlap.

When Refinancing Before Selling Actually Makes Sense

There are two situations where refinancing before a sale is the right move. The first is when you're not selling immediately but within the next 12 to 18 months, and refinancing now delivers enough interest savings to recover the upfront costs before you list. The second is when your current loan doesn't allow you to access equity without refinancing, and you need that equity to secure your next property before your current one sells.

In the second scenario, you're choosing between refinancing to unlock equity or losing the property you want to buy. If the property you're targeting is in an area with limited stock, like Bundoora where family homes near schools and RMIT's campus move quickly, the cost of refinancing may be worth it to avoid missing out. You're paying for certainty rather than savings.

Outside those scenarios, refinancing in the months before you sell is usually a decision made without understanding the full cost structure. A loan health check six months before you plan to list will identify whether refinancing delivers any measurable benefit or whether you're better off leaving your current loan in place until settlement.

Call one of our team or book an appointment at a time that works for you. We'll review your current loan, calculate the costs of refinancing against your expected timeline, and structure your next purchase in a way that avoids unnecessary fees and break costs.

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