When refinancing, many borrowers focus purely on chasing a better rate, however there is another lever that can make a big difference to your borrowing power and that is your loan term.
When you refinance your investment loan, your lender will give you the option to reset the term back to 30 years. This move can reduce your monthly repayments, improve cash flow, and increase your borrowing capacity for your next purchase.
Why It Works
Lower repayments = higher serviceability
Lenders assess your ability to repay future loans based on your current commitment(s). Lower repayments mean your borrowing capacity can stretch further.
More flexibility for investors
Extra cash flow can go towards your next deposit, maintenance, or offset account savings for your primary place of residence (PPOR).
Strategic use matters
This approach usually makes the most sense on investment loans, not your home (PPOR) loan, since a longer term means more interest paid over time.
A Quick Example
Say you took out a $700,000 investment loan five years ago on a 30-year term at 5% interest. Your repayments would have been around $3758 per month.
After five years, your loan balance would have reduced to about $641700, with 25 years remaining.
If you refinance now and reset the term back to 30 years, your repayments drop to around $3445 per month, freeing up roughly $313 in monthly cash flow.
That extra buffer of $313 per month can improve your borrowing power for your next purchase, or simply give you more breathing room in your budget.
Final Thoughts
Every refinance is an opportunity to reshape your financial strategy, not just to save on interest, but to strengthen your long-term position. Whether it’s improving cash flow, unlocking equity, or planning your next move, the right loan structure can make all the difference.
If you would like to explore whether resetting your loan term makes sense for your situation, we are always happy to walk you through the numbers and options.
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