Proven Tips to Refinance Before Selling Your Property

Refinancing before you sell can seem counterintuitive, but it makes sense in specific situations where you need to access equity for a deposit on your next property, want to lock in a lower rate while you still have borrowing power, or need to consolidate debt before your income structure changes.

As a consultant pharmacist, you might be moving between contracts, shifting from ABN to PAYG work, or planning a sabbatical. Any of these changes can affect your borrowing capacity. If you refinance while your income is still strong and verifiable, you can lock in the funding you need before your application becomes more complex.

Why You Might Refinance Before Listing

You refinance before selling to access equity for your next deposit, secure a lower rate while your income is stable, or consolidate debt before your financial position shifts.

Consider a consultant pharmacist working across two metro hospitals on a fixed-term contract. They want to buy their next home before selling their current one, but they need a 10% deposit. Their property has grown in value, and they have roughly $80,000 in usable equity. By refinancing and accessing that equity now, they can make an offer on the new property without waiting for settlement on the old one. The alternative is selling first, renting temporarily, and potentially missing out on properties that suit their needs.

This approach works when the cost of holding two properties briefly is lower than the cost of missing the right property or losing negotiating power. It also assumes you can service both loans during the overlap period, which is where your current income and employment structure matter.

Accessing Equity Without Selling

You can access equity by refinancing your existing loan and increasing the loan amount, with the additional funds released at settlement.

Lenders will typically allow you to borrow up to 80% of your property's current value without paying lender's mortgage insurance. If your property is worth more now than when you bought it, and your loan balance has reduced, the gap between those two figures is your usable equity. A loan health check can help you understand how much equity you have and whether refinancing makes sense in your situation.

The application process involves a new property valuation, updated income verification, and a credit assessment. If you are working on an ABN, you may need to provide recent tax returns or a letter from your accountant. If you have moved from employed to contract work recently, some lenders will still assess your income using payslips if the gap is short.

When Your Fixed Rate Period Is Ending

If your fixed rate is about to expire and you are planning to sell within six to twelve months, refinancing to a variable rate can give you flexibility without break costs.

Fixed rate loans typically include significant break costs if you exit early. These costs can run into thousands of dollars, and they apply even if you are selling the property. If you refinance to a variable rate before listing, you avoid those break costs entirely. You also gain access to features like offset accounts and redraw, which can help you manage your cash flow while you prepare the property for sale.

This is particularly relevant for consultant pharmacists who might have deferred selling due to market conditions or personal circumstances, and who are now coming off a fixed rate that was locked in at a higher rate than current variable options. You can read more about managing this transition in our article on fixed rate expiry.

The Overlap Period and Serviceability

You need to demonstrate that you can service both loans during the overlap period, which means your income and existing commitments will be assessed as if you are holding both properties at once.

Lenders will assess your ability to repay both the existing loan and the new loan simultaneously. This can be difficult if you have recently reduced your hours, moved to contract work, or taken on additional debt. If your income has dropped or your expenses have increased, you may not meet serviceability requirements even if you have sufficient equity.

In our experience, consultant pharmacists who are planning to sell within three to six months often benefit from structuring the refinance so that the new loan includes an offset account, allowing them to park the proceeds from the sale immediately and reduce interest while they finalise the purchase of the next property. This keeps your options open and reduces the cost of holding both properties.

Refinancing to Consolidate Debt Before You Sell

Consolidating personal loans, car loans, or credit card debt into your mortgage before selling can improve your borrowing capacity for the next purchase.

If you are carrying debt on credit cards or personal loans, those repayments reduce your borrowing capacity when you apply for your next home loan. By consolidating that debt into your mortgage now, you reduce your monthly commitments and improve your serviceability for the next application. This is particularly useful if you are planning to borrow close to your maximum capacity for the next property.

The cost of consolidating is the additional interest you pay on that debt over the life of the loan, which is typically much longer than the original debt term. However, if consolidating now means you can borrow enough to secure the property you want, the trade-off can be worthwhile. You can explore your options further in our guide to debt consolidation loans for pharmacists.

The Cost of Refinancing Versus the Benefit

Refinancing involves application fees, valuation fees, and potentially discharge fees on your existing loan, so the benefit needs to outweigh those costs.

Typical costs include a valuation fee of around $200 to $300, a discharge fee from your current lender of $150 to $400, and potentially an application fee depending on the lender. If you are accessing equity, you may also pay a small fee for the additional loan amount. These costs add up, so refinancing makes sense only if the equity you access, the rate you secure, or the serviceability you gain justifies the expense.

If you are refinancing purely to access a lower rate and you plan to sell within three months, the interest saving may not cover the cost of switching. However, if you are accessing equity to fund your next deposit or consolidating debt to improve your borrowing capacity, the upfront cost is usually worth it. Our home loan refinancing for pharmacists page outlines the process in more detail.

What Happens to the Loan When You Sell

When you sell, the proceeds from the sale are used to discharge the refinanced loan, and any remaining funds go to you.

The process is handled by your conveyancer or solicitor at settlement. They will request a payout figure from your lender, which includes the outstanding loan balance plus any accrued interest and discharge fees. That amount is deducted from the sale proceeds, and the remaining funds are transferred to your nominated account. If you have already purchased your next property using equity from the refinance, those funds will have been used for the deposit, and the sale proceeds will reduce or clear your remaining debt.

This is why timing matters. If you refinance, access equity, and then sell quickly, you may end up with two loan accounts briefly before consolidating them into a single loan on the new property. Your broker can help you structure this so the transition is smooth and you are not paying more interest than necessary during the changeover.

Refinancing before you sell is not the right move for everyone, but it can give you options and financial flexibility when your circumstances require it. If you are weighing up whether to refinance now or wait until after settlement, the decision comes down to your current income, your equity position, and how quickly you need access to funds. Call one of our team or book an appointment at a time that works for you.

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