Home refinance has emerged as a critical strategy for young Australians determined to overcome the affordability barriers of the property market. With property prices continuing to rise and interest rates falling for the first time since early 2023, many are seizing the opportunity to refinance, cut borrowing costs, and reallocate funds into smarter investment choices.

The Reserve Bank of Australia’s two rate cuts in 2025, bringing the cash rate down from 4.35% to 3.85%, have reshaped the lending landscape. In response, a growing number of younger investors are combining refinancing with rentvesting: owning property in affordable locations while renting in lifestyle hubs. This dual-track approach allows for both capital growth and lifestyle flexibility.

The Shift in First Home Buyer Behaviour

The property ownership dream is changing shape. More than half of first home buyers are now exploring rentvesting, a noticeable 4% rise from 2024. This signals a broader shift away from the conventional model of buying a home to live in as a first step. Instead, young Australians are investing in growth-focused locations and maintaining their preferred living arrangements elsewhere.

This shift is not just anecdotal. Data from financial institutions and industry bodies confirms a steady rise in younger buyers choosing rentvesting and refinancing as their entry points into the market.

The 2025 Refinancing Opportunity

Refinancing activity has surged in 2025, driven by more favourable lending conditions and increased market competition. As lenders vie for new customers, many are offering discounted interest rates, waived fees, and flexible refinancing packages.

For borrowers who locked in higher rates during the 2022–2023 tightening cycle, this presents a compelling opportunity. Investment loan rates currently range between 5.34% and 7.10%, and analysts suggest further easing is possible before the end of the year.

The financial upside of home refinance is significant. According to current modelling, a typical borrower can save nearly $7,000 per year by switching to a lower rate. That saving, when redirected into an investment loan or additional property, can materially accelerate wealth-building goals. Tools like the servicing calculator help borrowers assess whether refinancing could improve their borrowing capacity or ease cash flow pressures.

Real-World Example: Rentvesting in Action

Karen Nguyen, a 33-year-old tech consultant in Sydney, offers a real-life example of this dual strategy in action. Rather than buying in Sydney’s expensive inner west, she purchased her first property in Adelaide in 2022. Using equity gains and a strategic refinance completed in early 2025, she secured a second investment in Rockhampton.

This approach allows her to rent a unit close to work and social networks in Sydney while her properties in lower-cost markets deliver long-term growth and rental income. As Karen notes, “I get to live where I want without sacrificing my investment goals. Refinancing gave me the leverage to expand.”

Financial Logic Behind Rentvesting

Rentvesting often produces a stronger financial position than traditional homeownership, particularly in high-cost urban centres. Factoring in tax benefits, such as deductions for loan interest, maintenance, and depreciation, further tilts the balance in favour of investment-led strategies. Rentvestors also enjoy flexibility: they can upsize, downsize, or relocate without the restrictions of an owner-occupied mortgage.

Scenario

Traditional Buying

Rentvesting

Property

$2m in Sydney

$650k in Adelaide

Deposit (10%)

$200,000

$65,000

Stamp Duty & Fees

$100,000

$35,000

Monthly Mortgage

$9,000

$3,500 (investment)

Monthly Rent

N/A

$5,720 (inner city)

Tax Deductions

Limited

Interest, depreciation, expenses

Annual Cash Flow Advantage

N/A

$12,000+

Strategic Refinancing for Growth

Refinancing isn’t just about lowering repayments, it’s a tool for unlocking equity and funding future investments. Many investors who purchased in 2020–2022 now hold properties that have appreciated significantly. Refinancing allows them to access that increased equity and re-invest without relying on fresh savings.

Empower Money provides refinancing solutions designed for portfolio growth. By assessing existing loans and property values, they help borrowers identify how much equity they can release, and which structures (e.g. interest-only loans) may suit their goals.

When refinancing an investment loan, borrowers can typically continue to claim interest payments as a deductible expense, provided the funds are used for investment purposes. This keeps the tax efficiency of the strategy intact.

Regional Markets Dominate Investment Shortlists

With capital city prices remaining high, regional markets have become the go-to for first-time investors. Areas such as Newcastle, Launceston, and regional Queensland centres like Rockhampton and Bundaberg offer a compelling mix of affordability, rental yield, and growth potential.

Ongoing investment in infrastructure, such as transport upgrades, university expansions, and healthcare precincts, continues to drive migration and demand in these regions. As a result, rental yields often outperform capital cities, providing stable income for rentvestors.

According to recent CoreLogic figures, regional housing markets have seen 54% growth over the past five years, compared with 36% in capital cities. This regional performance has been a key factor in motivating younger investors to think beyond metro boundaries.

Smart Preparation for New Investors

Experts advise that preparation is key when combining refinancing with a rentvesting strategy. Coordinating a refinance before beginning the property search is critical to establishing clear borrowing limits and speeding up approval timelines.

1. Get pre-approval: Demonstrates seriousness to agents and speeds up the buying process
2. Complete refinance first: Equity release takes time, avoid overlapping this with settlement deadlines
3. Build a buffer: Budget for rental gaps, interest rate changes, and unexpected maintenance
4. Consult professionals: Mortgage brokers, tax agents, and buyer’s advocates can flag risks and opportunities

Rentvesting Risks

• Loss of first home buyer incentives: Grants and stamp duty discounts often apply only to owner-occupiers
• Capital gains tax: Investment properties don’t qualify for the main residence CGT exemption
• Vacancy periods: Rental income isn’t guaranteed, budgeting for periods without tenants is essential
• Insurance complexities: Investment properties require landlord insurance, public liability cover, and maintenance planning

Outlook for 2025 and Beyond

The property market outlook remains strong, particularly for investors targeting growth and yield. According to CoreLogic, 65% of real estate agents forecast continued price increases into late 2025, with 25% expecting gains of 5% or more.

Queensland is seen as the standout market, with 70% of agents predicting strong performance. Meanwhile, demand for investment loans is rising, with 37.8% of new lending in 2024 directed toward investors.

Population growth and tight housing supply continue to place upward pressure on property prices. In this environment, rentvesting allows younger buyers to stay nimble, capitalising on regional growth while preserving their city lifestyle.

Interest rate movements remain a key watchpoint. Any further cuts by the RBA would reduce borrowing costs and improve the feasibility of additional property purchases through home refinance.

Conclusion

In 2025, young Australians face a different property landscape, one that requires adaptability, knowledge, and forward planning. Combining home refinance with rentvesting allows them to break into the market without compromising on lifestyle, while setting themselves up for long-term financial success. Rather than chasing a traditional owner-occupied home, this new generation of investors is using strategies that reflect the realities of high property prices and the flexibility of modern living.

With the right approach, tools like the servicing calculator, and refinancing support from providers like Empower Money, young Australians can make confident, informed decisions in a fast-moving market. The key to success lies in preparation, professional advice, and a clear commitment to building wealth steadily, not speculatively.