Trapped with an overpriced lender?If you're with a tier 1 or tier 2 lender paying more than you should, but normal refinancing keeps failing on serviceability, a specialised 1% buffer refinance could be the answer. Same borrowers, no cash out, clean history and you could finally move to a sharper rate. |
The refinance trap
Why good borrowers can't always refinance.
It's not that you can't afford your current loan. It's that the lender's serviceability test for a new loan can be so strict that a cheaper rate becomes impossible to approve.
| You're paying too muchTier 2 lenders and some major banks keep loyal customers on rates well above what new customers are offered. | Standard refinance says 'no'Most lenders test your new loan at a 3% buffer above the offered rate. That can push your assessed repayment beyond what serviceability allows. | You're stuck until something changesWithout a pathway out, borrowers watch their rate stay high while cheaper options sit just out of reach. |
How the 3% buffer blocks a cheaper moveUnder a standard serviceability test, a lender assesses your new loan as if the rate were roughly 3 percentage points higher than the actual rate you're applying for. That creates a large assessed monthly repayment and if your income doesn't comfortably cover it, the refinance is declined, even though the real repayment would be lower than what you currently pay. The result? You're penalised for loyalty and trapped with a lender who has no incentive to sharpen your rate. |
The alternativeA 1% serviceability buffer can unlock the door.Some lenders offer a specialised refinance policy for borrowers moving away from an overpriced loan. Instead of testing your new loan at a 3% buffer, they may assess it at around 1% above the offered rate. That lower buffer means the assessed repayment is smaller, serviceability can pass, and you can finally refinance to a more competitive lender without changing your actual monthly budget.
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Do you qualify?
Five boxes to tick.
This type of refinance has tighter rules than a standard application. If you meet all five, it's worth exploring.
| 1 Same borrowersThe people on the existing loan must be the same people on the new loan. | 2 Individual names onlyThis policy is generally for loans held in personal names, not trusts or companies. | 3 Minimum 12 months with current lenderYou usually need to have held the loan with your existing lender for at least a year. |
| 4 No cash outThe new loan amount must not exceed the current balance straight refinance only. | 5 Good repayment historyClean conduct on the existing loan for the recent period, typically 6 months or more. |
Important: this is a narrow policy, not a loopholeThe 1% buffer option is designed for genuine rate-relief refinances. It is not available for debt consolidation, equity release, or changing the ownership structure. Lenders enforce the conditions strictly, and every application is assessed on its full merits. |
Worked example
What the savings can look like.
A $600,000 loan moved from an overpriced tier 2 rate to a sharper market rate. The real repayment falls, and the 1% buffer makes the refinance approvable.
| Current overpriced loan Stuck with the existing lender
| After 1% buffer refinance Moved to a sharper lender
Because the assessed repayment under the 1% buffer (~$3,990) is lower than the standard test (~$4,850), the refinance can pass serviceability even though your actual budget already copes with the old ~$3,945 repayment. |
| Important: These figures are illustrative only. Actual rates, repayments, fees and approval outcomes depend on the lender, your income, credit history, property value and loan-to-value ratio. The example shows why the 1% buffer matters not a guarantee of savings. |
| How we help We find the lender that fits your file.Not every lender offers a 1% buffer refinance, and the rules change. Our brokers match your situation to the right policy, prepare the application correctly, and chase it through to approval so you don't waste time on lenders who can't help.
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FAQ
Common questions about 1% buffer refinancing.
| What is a 1% buffer refinance? | It's a specialised refinance policy where the lender assesses your new loan at 1% above the offered rate, instead of the more common 3% buffer. That lower assessed repayment can help borrowers who are otherwise blocked by standard serviceability rules. |
| Who is this designed for? | Borrowers who are with a tier 2 lender or an overpriced tier 1 lender, have a clean repayment history, and want to refinance to a lower rate without taking cash out. It's for genuine rate relief, not equity release. |
| Can I change the names on the loan? | No. The borrowers must stay exactly the same. This policy doesn't allow adding or removing borrowers, or refinancing into a trust or company name. |
| Do I need to have been with my lender for 12 months? | Yes, that's a typical requirement. Lenders want to see at least 12 months of loan conduct with your current lender before they'll consider the 1% buffer option. |
| Can I take cash out or consolidate debt? | No. This policy is for straight refinance only the new loan amount must match or be lower than the existing balance. No cash out, no debt consolidation, no equity release. |
| Will my actual repayment be based on the 1% buffer? | No. The buffer is only used to test whether you can afford the loan. Your actual repayment is calculated using the real rate the lender offers you. |
| What counts as 'good repayment history'? | Generally no missed or late payments for at least the last 6 months, and sometimes longer. Lenders will look at your loan statements to confirm clean conduct. |
| Which lenders offer this? | The list changes and policies vary. We maintain an up-to-date view of which lenders are accepting 1% buffer refinances and under what conditions, then match your file to the right one. |
Get in touchLet's check if a 1% buffer refinance works for you.Book a free, no-obligation chat. We'll review your current lender, rate and statements, then tell you honestly whether this option or another strategy is the right move. Melbourne office Queensland office Phone | |