Mortgage Prisoners: When You Cannot Refinance

Key takeaways

• Meeting repayments is not the test - the buffered assessment is.
• Some lenders apply a modified assessment for like-for-like refinances with no increase in debt.
• Repricing with your existing lender does not require passing serviceability again.
• Reducing commitments before applying is often the difference between pass and fail.

Why it happens

Consider a borrower who took a $700,000 loan when rates were low. Their actual repayment is manageable and has never been missed. Today a new lender must assess them at about 9.5%, where that same loan implies a repayment several hundred dollars a month higher than their real one.

Add any of the following and the assessment tightens further:

• Income that has not risen with rates
• A new car loan or credit card since settlement
• Children, and therefore a higher HEM benchmark
• A property valuation that has not moved, leaving LVR above 80%

What actually works

1. Reprice with your current lender. No serviceability test, no costs, and retention teams have real discretion. This is the highest-yield first move.
2. Find a lender applying a modified assessment. Some lenders reduce or waive the full buffer for a like-for-like refinance where the debt is not increasing.
3. Cut assessed commitments. Cancelling a $15,000 credit card limit can lift capacity by $50,000-$70,000.
4. Extend the term. A longer term lowers the assessed repayment, at the cost of more total interest.
5. Wait for a revaluation. Getting under 80% LVR widens the lender pool and improves pricing.

If none of it works

Repricing is still available every year - do it annually, not once. Direct every spare dollar at the principal, since reducing the balance improves both the LVR and the assessment. And if the repayment itself is becoming difficult rather than merely expensive, contact the lender's hardship team before missing a payment, not after.

Frequently asked questions

Is the serviceability buffer ever waived?

APRA permits lenders to apply a modified assessment for like-for-like refinances where the borrower is not increasing their debt. It is a lender-by-lender policy, not an automatic entitlement.

Does my repayment history help?

With your existing lender, considerably - it supports a repricing request. With a new lender it helps, but it does not replace the serviceability calculation.

Should I use a broker?

This is exactly the case where policy knowledge matters more than rate shopping. Which lenders apply a modified refinance assessment is not published anywhere.

Related reading

• Refinancing Your Home Loan: The Complete 2026 Process
• Financial Hardship: Your Rights Before You Miss a Payment
• Self-Employed Home Loans: How Lenders Assess Income

Sources

• Prudential Practice Guide APG 223 — APRA
• Switching home loans — ASIC Moneysmart