Why people use specialist lenders, what a bank looks at the second time around, and when it's worth waiting.
Grace Home Loans team
6
min read
Why look at your loan now?
On 29 September 2026 the Reserve Bank lifted the cash rate by 0.25 percentage points to 4.60%, the fourth increase this year and the highest cash rate since late 2011. If you're paying a specialist lender's rate, that's a good prompt to check whether your loan still suits your situation.
A higher cash rate doesn't make you eligible for a bank loan on its own. Eligibility changes when your finances, credit history, income evidence or equity change, and that's where an opportunity may be.
There's also no need to rush just because rates have moved. ABS figures for the June quarter 2026 show owner-occupier refinances to a new lender fell 0.9% to 66,449 loans, and investor refinances to a new lender fell 2.3% to 36,597, so the data doesn't point to a new surge in switching. A review should be driven by your numbers and your circumstances, not the headlines.
Why people end up with a specialist lender
Specialist lenders, sometimes called non-bank or non-conforming lenders, can assess situations that a major bank may decline or can't assess under its standard policy. Common reasons include:
Credit history issues: past defaults, missed repayments or arrears.
New self-employment: not enough financial history yet for a standard assessment.
Tax debt or complicated income: income that is hard to verify under a bank's policy.
Borrowing capacity: a position that didn't fit a major bank's rules at the time.
These loans often come with a higher rate, so for many borrowers they work best as a stepping stone: solve the immediate problem now, then review the loan later once your situation has changed. That's one reason we check in with clients after settlement.
What a mainstream lender will look at
There's no set time after which you automatically become eligible. What matters is whether the reason you needed a specialist lender has changed. A lender will typically look at:
Repayment history: recent, on-time payments on your mortgage, credit cards and other debts.
The original credit issue: whether a default has been paid, a debt agreement discharged or arrears brought up to date. Lenders treat resolved and older events differently from recent or ongoing ones.
Income and employment: whether your income can be verified under the new lender's policy. For self-employed borrowers who started on a low doc loan, another lodged tax return can make a real difference.
Borrowing capacity: whether your income still supports the loan after living expenses, dependants, credit card limits and other debts. Paying down other debts can change the result.
Equity and LVR: a lower loan balance or a higher valuation can widen your options. Having 20% equity can help, but it isn't an approval rule.
The purpose of the refinance: a straightforward refinance can be assessed differently from one that includes debt consolidation or cash out.
The property: the new lender also needs to be comfortable with its type, location and valuation.
Should you refinance as soon as you qualify?
Not always. A lower rate has to be weighed against the cost of switching, a possible LMI premium, the loan term, the features you'd give up or gain, and the total interest over time. Sometimes staying where you are makes more sense.
Sometimes the answer is 'not yet'. That's still useful, because a broker can show you what's holding the application back and what would need to change before the next review.
How a review can play out
This is a simplified illustration, not a real client case. A couple took out a specialist loan after a Part IX debt agreement. Three years later, the agreement has been discharged, their repayments are up to date, and both have stable, verifiable incomes. At review, a mainstream lender may now be able to assess their application under its standard policy, which can open up lower-rate options that weren't available before.
Whether switching is then worth it comes down to the gap between their current rate and the new one, set against the costs of moving. That's exactly the comparison we run for clients.
Common questions
Can you refinance to a major bank after bad credit?
It may be possible. The lender will want to understand what happened and what has changed since. A paid default is treated differently from an unpaid one, and a discharged debt agreement differently from an active one. There's no single waiting period across all lenders, so the useful question isn't how long you've been with your specialist lender. It's what your credit file and repayment history look like now.
Can you move from a low doc loan to a full doc loan?
For many self-employed borrowers this is a realistic path. If you started your business recently, you may not have had the tax returns or financial statements a standard assessment needs. After another financial year, lodged returns can give you stronger evidence of your income and more lender options. Whether you qualify depends on each lender's policy.
Do you need 20% equity to refinance?
Not necessarily. An LVR of 80% or below can make a refinance easier because it may avoid a new LMI premium, but it doesn't guarantee approval. A borrower at 80% can still fail serviceability or credit policy, while someone above 80% may still have options. Equity is one part of the assessment.
How we can help
We review your current rate, repayment history, credit position, income and equity, and tell you honestly whether a mainstream lender may now be an option, or what would need to change first.
Note: Lending criteria, credit policy, rates and eligibility vary between lenders and change often. This is general information and doesn't take your personal circumstances into account.
Figures current as at 8 October 2026. Sources: Reserve Bank of Australia board decisions and The Adviser, reporting ABS lending indicators for the June quarter 2026.