Can I Refinance My Home Loan If I Don't Pass the Bank's Serviceability Test?
Updated: September 2026
You might be making every home loan repayment on time and still be told you can't refinance to another lender.
It sounds strange, but it's becoming an increasingly common problem for Australian homeowners.
New MFAA research released in September 2026 found 49.2% of surveyed mortgage brokers said more clients were having difficulty refinancing because they couldn't meet serviceability requirements—more than double the 24.4% reported six months earlier.
So if you've been told you don't have enough borrowing capacity to refinance, it doesn't necessarily mean you're out of options.
Different lenders can assess your income, expenses, debts and overall financial position differently. Your existing lender may also be willing to negotiate your current rate, and in some circumstances lenders can consider applications outside their standard serviceability policy.
The important part is understanding why you failed the assessment before deciding what to do next.
Been told you can't refinance?
At Thrive Financial Group, we can review:
1. Your current home loan
2. Why you may not be passing serviceability
3. How different lenders may assess your circumstances
4. Whether staying with your current lender or refinancing could be worth exploring
Send us “REFINANCE” and we'll take a look at where you stand.
What does home loan serviceability mean?
Serviceability is a lender's assessment of whether you can afford to repay a loan.
The lender doesn't simply look at whether you've been making your existing repayments.
It will generally assess your income against your existing debts, living expenses, financial commitments and the repayments associated with the proposed loan.
For banks regulated by APRA, mortgage applications are generally assessed using an interest rate at least 3 percentage points above the actual loan product rate. APRA confirmed in 2026 that this minimum serviceability buffer remains in place. APRA
For example, if a new loan had an interest rate of 6%, the lender's assessment doesn't necessarily assume you'll only ever need to handle repayments at 6%.
The buffer is designed to test whether you could continue meeting your obligations if your circumstances or interest rates changed.
Why can I afford my current mortgage but not refinance it?
This is the part that can be frustrating.
You might have been paying your mortgage successfully for years.
You find another home loan that appears to offer a better deal.
But when you apply to move, the new lender assesses you under its current lending and serviceability requirements.
Changes in interest rates, living costs, your income, credit-card limits, other debts, dependants or lender policy can all affect the result.
So:
Being able to make your existing repayment and satisfying a new lender's serviceability assessment are not necessarily the same thing.
That's one reason borrowers can become effectively stuck with their current lender.
Do all banks calculate borrowing capacity the same way?
No.
This is one of the most important things to understand before giving up on refinancing.
Lenders can differ in how they assess things such as:
Overtime, bonuses and allowances
Casual or variable income
Rental income
Existing debts
Credit-card limits
Living expenses
Dependants
Self-employed income
Existing investment properties
Loan terms and structures
Two lenders can therefore look at the same borrower and arrive at different outcomes.
That's also why an online borrowing calculator—or a rejection from one lender—doesn't necessarily tell you what every lender will do.
Can a lender refinance me if I don't pass the standard serviceability test?
Potentially, in some circumstances.
APRA has specifically acknowledged that some borrowers seeking to refinance may not meet standard loan criteria even though they have demonstrated an ability to make their existing repayments.
APRA permits banks to make exceptions to serviceability policy on a case-by-case basis, provided those exceptions are managed prudently. Previous repayment behaviour is one factor a lender may potentially consider.
That doesn't mean a lender can simply ignore responsible lending requirements, and it certainly doesn't mean an application will be approved.
It means “I don't pass the standard calculator” isn't always the end of the conversation.
Individual lender policies and eligibility requirements matter.
What can I do if I've been told I can't refinance?
First, find out why.
There is a significant difference between being unable to refinance because of income, expenses, existing debts, LVR, credit history or a particular lender's policy.
Once you understand the constraint, you can look at your actual options.
That might mean comparing how another lender assesses your circumstances.
It could mean speaking to your existing lender about its pricing.
It could mean restructuring lending where appropriate.
Or it could mean that refinancing simply doesn't make sense right now.
Interestingly, the latest MFAA survey found that during the six months to August, 96% of brokers surveyed had helped a client secure a discount from their existing lender, 95% had helped a client refinance and 91% had helped restructure a home loan.
The solution isn't always “change banks.”
Can my current bank lower my rate if I can't refinance?
Potentially.
If moving lenders isn't currently possible, it's still worth reviewing your existing loan.
Your current lender may be willing to reprice your loan rather than lose your business.
That doesn't guarantee a reduction, but it means refinancing shouldn't be the only outcome considered in a home-loan review.
Sometimes the best outcome is moving lenders.
Sometimes it's staying where you are on improved pricing.
And sometimes the right decision is making no change at all.
Does reducing my credit card limit improve borrowing capacity?
It can, depending on your circumstances and the lender.
When assessing borrowing capacity, lenders can consider your credit limits, rather than simply how much you've currently spent on the card.
Other debts such as personal loans, car loans and Buy Now Pay Later commitments may also affect serviceability.
That doesn't mean you should automatically close accounts before applying for a mortgage.
A broker can first identify what's actually affecting your borrowing capacity so you don't make unnecessary changes.
Does having more equity help me refinance?
It can, but equity and serviceability are different things.
You could own a substantial portion of your property and still fail a lender's serviceability assessment.
Conversely, your income may comfortably support the proposed repayments but a high loan-to-value ratio could restrict the products available to you.
That's why both need to be considered when assessing your refinancing options.
Should I apply to lots of banks until one approves me?
I wouldn't make that your first strategy.
Instead, work out which part of your application is causing the problem and then identify lenders whose policies may suit your circumstances.
This is one of the situations where using a mortgage broker can be particularly useful.
Rather than repeatedly submitting applications, a broker can compare lending policies and borrowing capacity before determining whether there's an appropriate option to pursue.
Mortgage brokers now facilitate 81.6% of new Australian residential home loans, according to Cotality data commissioned by the MFAA for the June 2026 quarter.
I've been declined for refinancing. What should I do next?
A declined refinance doesn't automatically mean you can't improve your home loan.
And it doesn't automatically mean another lender will approve you either.
What matters is understanding why the application didn't work.
Start with:
Your current loan balanceYour current interest rateYour approximate property valueYour income and employment situationYour existing debts and credit limits
From there, you can determine whether another lender may assess your circumstances differently, whether your current lender could improve your existing loan, or whether you're better off staying where you are for now.
Already been told you can't refinance?
Don't just start applying to different banks.
Send Thrive “REFINANCE” and we'll review your situation and help you understand what options may be worth exploring.
If there's an appropriate pathway, we'll explain it.
If staying with your existing lender makes more sense, we'll tell you that too.
Thrive Financial Group — Service. Simplicity. Strategy.
This information is general in nature and does not take into account your individual objectives, financial situation or needs. Lending criteria, rates, fees and eligibility requirements vary between lenders and are subject to change.
