A refinance is usually rejected because the new lender’s assessment didn’t line up with what you applied for. The most common reasons are that the loan didn’t pass the serviceability test, the valuation came in lower than expected, or something in your credit file, bank statements or cash-out purpose didn’t fit the lender’s policy.
Being rejected doesn’t change your existing loan, and it doesn’t always mean another lender will say no. The next step is diagnosis: find out the reason, check your credit report, and fix what you can before another application adds another credit enquiry.
Why do refinance applications get rejected?
A new lender assesses your file as it stands today, even if your current lender approved you years ago. It may reject a refinance because:
- the loan doesn’t service under its current assessment rules
- the valuation came in lower than expected
- the requested loan-to-value ratio (LVR) is too high
- the cash-out purpose is vague or not accepted
- bank statements show missed payments, overdrafts or gambling
- your income has changed since the original loan
- credit card limits or other debts are too high
- self-employed financials are out of date or inconsistent
- you asked for interest-only and the lender won’t accept it
- the property type or location doesn’t fit its policy
What should you do first after a refinance is rejected?
Moneysmart’s guidance on loan rejection is a good starting point. Work through these steps in order:
- Ask why. Contact the lender or your broker and get the reason as specifically as possible.
- Get your credit report. Moneysmart explains that you can get a free copy of your credit report from each credit reporting body, and how to correct errors (Moneysmart, credit scores and credit reports).
- Fix errors and gaps. Dispute incorrect listings, pay overdue amounts and update any out-of-date documents.
- Pause new applications. Moneysmart warns that several applications in a short period can look bad on your credit report.
- Re-check the numbers. Make sure the refinance is still worth doing once costs are included.
How can a valuation change the result?
Many refinance plans rely on an estimate of the property’s value. If the lender’s valuation is lower, the refinance may fail because:
- the LVR becomes too high for that lender’s policy
- the cash-out equity is no longer available
- lenders mortgage insurance (LMI), which usually applies above 80% LVR, comes into play
- the loan amount needs to be reduced
This is especially common with cash-out refinances, debt consolidation and investment property refinances. If you were relying on equity, read the cash-out refinance guide before you try again.
Why can serviceability be weaker now?
Your income might be the same, but the assessment may be tougher. Under APRA’s guidance, lenders test whether you could meet repayments at least 3 percentage points above the loan rate (APRA, APG 223). The RBA lifted the cash rate target to 4.60% on 30 September 2026 (RBA), so higher rates feed into that test.
Your borrowing capacity can also be affected by:
- more dependants
- new car loans or personal loans
- higher living expenses
- credit card limits, even if the balances are low
- reduced overtime, bonus or business income
- a move from PAYG to self-employment
That is why a refinance can be declined even if you have never missed a repayment.
Which rejection reasons can be fixed, and how?
| Rejection reason | What may help | Typical timing |
|---|---|---|
| Serviceability | Reduce card limits, pay down debts, adjust the loan amount or term | Weeks to months |
| Low valuation | Reduce the cash-out amount, or try a lender with different policy | Can be quick |
| Credit report issue | Correct errors, pay overdue accounts, let conduct improve | Depends on the issue |
| Bank statement conduct | Show a period of clean statements before reapplying | Usually months |
| Income evidence | Update tax returns, finish probation or provide fuller documents | Depends on the gap |
| Cash-out purpose | Document the purpose with quotes, contracts or statements | Can be quick |
The timing column is a general guide only. Every lender applies its own criteria.
Was the refinance worth doing in the first place?
Moneysmart’s guidance on switching home loans reminds borrowers to weigh fees and costs against the saving. Before trying another lender, check:
- your current balance, rate and repayment
- the new rate and repayment
- discharge, application, valuation and settlement costs
- the break-even period
- features gained or lost
- whether the loan term resets
Our refinance break-even guide walks through the maths. If the benefit is small, asking your current lender to reprice may be the better first move. The guide on when refinancing is worth it covers that decision in more detail.
When can another lender still work?
Another lender may work if:
- the decline was lender-specific
- another lender treats your income type differently
- another lender’s valuation or LVR policy suits the property better
- the cash-out purpose can be documented more clearly
- the loan amount is adjusted
- debts are reduced first
- the application is restructured
Choose the next lender based on the reason for the rejection, not the lowest advertised rate. Any new application is still subject to that lender’s criteria and approval.
What should you prepare before the next attempt?
- your current loan statement and repayment history
- income documents
- credit card, car loan and personal loan statements
- recent bank statements
- your credit report, with any errors resolved
- property details and a realistic value estimate
- the reason for the refinance
- evidence for any cash-out purpose
What is the next step?
If your refinance was rejected, send your current loan balance, rate, property value estimate, decline reason and goal through the refinance enquiry form. We can check whether another lender is realistic, whether the structure needs changing, or whether waiting is the stronger move.