Simple hacks to refinance your commercial property

Your commercial property loan was probably right for your business when you first secured it, but things change. Refinancing a commercial property gives you access to equity you've built, lets you adjust loan terms to match current cashflow, and often reduces your repayments through lower rates or better structure.

Why refinance a commercial property instead of keeping your current loan

Refinancing lets you adapt your loan to where your business is now, not where it was when you first bought. You might have built substantial equity in your property, your cashflow might have improved, or you might be paying more than you need to because your original loan was structured conservatively. Lenders assess commercial property differently depending on whether it's owner-occupied or investment, the quality of your lease or tenant, and the property's location and zoning. A business operating from a warehouse in Seventeen Mile Rocks with consistent turnover will have different refinance options compared to an investor holding a strata office in Fortitude Valley with a long-term commercial tenant. Refinancing is also common when a fixed rate term ends and the revert rate is higher than what's available elsewhere.

Consider a physiotherapy practice operating from a clinic they own in Coorparoo. They originally borrowed at 70% LVR with a margin of 2.8% over the bank bill rate. After five years of paying down the loan and the property increasing in value, their LVR has dropped to around 55%. They refinanced to a loan with a lower margin, reduced their monthly repayments by around $1,800, and pulled out $120,000 in equity to fit out a second treatment room without disrupting cashflow.

What lenders look at when you refinance commercial property

Lenders assess the property itself and the income it generates or supports. For an owner-occupied property, they look at your business financial statements, turnover, and net profit. For an investment property, they focus on the lease terms, tenant quality, and rental income as a percentage of the loan repayment. Commercial property valuations are based on comparable sales and, for investment properties, the capitalisation rate applied to net rental income. A property in a well-zoned area close to infrastructure like the Gateway Motorway or near commercial precincts in Newstead will typically value more favourably than one in a location with limited commercial activity or unclear zoning. LVR is central to pricing. Most lenders will refinance up to 70% or 80% LVR depending on property type, but anything above 65% usually attracts a higher interest rate margin. If you're refinancing to release equity, lenders will assess whether the additional borrowing still fits within serviceability based on your business cashflow or the rental income.

How much equity you can access when refinancing

Equity is the difference between your property's current valuation and what you owe. If your commercial property is now worth $1.4 million and your loan balance is $750,000, you have $650,000 in equity. Most lenders will allow you to borrow up to 70% or 80% of the property's value, depending on use and location. At 70% LVR, that's a maximum loan of $980,000, meaning you could access up to $230,000 in usable equity. That equity can be used to expand your premises, purchase equipment, buy another property, or inject working capital into your business. Lenders will want to see how the additional borrowing will be used and whether your business can service the higher loan amount. If you're refinancing an investment property, they'll assess whether the rental income still covers the repayment at the new loan amount. Equity release through refinancing avoids the need for unsecured borrowing and typically comes with lower interest rates because the loan remains secured against the property.

Fixed or variable rates when refinancing commercial property

Commercial property loans are available on both fixed and variable rates, and many borrowers split the loan across both. A variable rate gives you flexibility to make extra repayments, redraw if the loan allows it, and benefit from rate cuts without break costs. A fixed rate locks in your repayment for a set term, usually between one and five years, which helps with budgeting and protects you if rates rise. Splitting the loan lets you hold some certainty while keeping some flexibility. If you're refinancing at a time when fixed rates are lower than variable, or you're concerned about rate movements, fixing part of the loan can make sense. Just be aware that breaking a fixed rate early to refinance again or pay down the loan usually attracts break costs, which can be significant depending on how rates have moved since you fixed.

How the commercial property refinance process works in Brisbane

Refinancing a commercial property follows a similar process to applying for a new commercial loan. You'll need updated business financials, a current lease if the property is tenanted, and details of how the property is used or zoned. The new lender will order a valuation, assess your serviceability, and review the security. Settlement usually takes four to six weeks depending on how quickly the valuation is completed and whether the title is straightforward. If you're refinancing a strata commercial property, the lender may also request a strata report to check for any special levies or building issues. For owner-occupied properties, lenders will want to see recent profit and loss statements and tax returns. If your business operates through a trust or company structure, they'll assess the financials of that entity and may ask for director guarantees. If you're releasing equity as part of the refinance, they'll want a clear explanation of how the funds will be used, particularly if it's for business expansion or property improvements. You don't pay stamp duty again when refinancing in Queensland unless you're adding a new property as security.

Loan structure and repayment flexibility

Commercial loans can be structured as principal and interest or interest-only, depending on your cashflow and goals. Interest-only is common for investment properties where the rental income covers the interest and the borrower isn't focused on paying down the loan quickly. For owner-occupied properties, principal and interest is more typical, though some borrowers use interest-only in the early years to preserve cashflow while the business grows. Loan terms typically range from five to 30 years, and some lenders allow longer terms for well-located investment properties with strong tenants. Flexible repayment options, including the ability to make extra repayments or redraw, depend on the lender and loan type. Some commercial loans are structured more rigidly, particularly if they're fixed or if the lender views the security or borrower as higher risk. When refinancing, you can often negotiate better terms, especially if your LVR has improved or your business financials are stronger than when you first borrowed.

When refinancing makes the most sense

Refinancing works when the benefit outweighs the cost. If you can reduce your interest rate by 0.5% or more, the saving over the life of the loan will usually cover any discharge fees, valuation costs, and application fees within the first year or two. If you need to access equity and the alternative is taking out an unsecured business loan at a higher rate, refinancing is often the more cost-effective option. Refinancing also makes sense when your loan structure no longer suits your business. A loan that was set up as interest-only might now need to switch to principal and interest, or a loan with limited flexibility might be holding you back from reinvesting in the business. If your fixed rate is about to expire and the revert rate is significantly higher than what you can secure elsewhere, it's worth reviewing your options a few months before the fixed term ends. For businesses that have grown or diversified, refinancing can also allow you to consolidate multiple loans or bring in additional security to support further investment.

Call one of our team or book an appointment at a time that works for you. We'll review your current loan, run the numbers on what you could access or save, and help you decide whether refinancing your commercial property supports where your business is headed.

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