Trigger 1 — Facility maturity within 12 months
The most universal refinance trigger is facility maturity — the contractual repayment of the bullet principal at the end of the 3–5 year facility term. Maturity is non-negotiable; the question is only whether the refinance is planned (clean process, full lender shopping, optimised pricing) or reactive (rushed, narrow lender pool, compromised pricing).
The right time to begin a maturity refinance is 6 months ahead of the contractual maturity date — early enough to run a clean process across multiple lenders, late enough that current financial position can be presented in submissions. Sponsors who begin the conversation 60 days before maturity inevitably narrow the lender pool to whoever can transact in the available window, and typically pay 25–75 bps versus the optimised refinance pricing.
Trigger 2 — Market pricing has compressed materially
Commercial loan pricing moves with the broader rate cycle, with lender competition cycles, and with the borrower's own credit profile evolution. When prevailing pricing on equivalent new deals has compressed materially below the current facility — typically 75+ bps — refinance economics usually justify the break and establishment costs even before facility maturity.
Worked example: a $2.0m facility currently at 8.25% has 2 years remaining. Current market pricing on equivalent new deals is 7.40% (85 bps below). Annual interest saving = $17,000. Refinance costs = ~$8,000 establishment + $5,000 legal/valuation + $3,000 break costs on variable (negligible) = $16,000 one-off. Payback under 12 months; net saving over remaining facility life ~$18,000. Refinance is positively economic.
Trigger 3 — Equity release for the next acquisition
Properties that have appreciated materially since original acquisition — through income growth flowing through cap rate, sub-market appreciation, or capex-driven value uplift — often hold substantial equity that can be released through a refinance to fund the next acquisition. The economic question is whether the marginal cost of the released equity (the new facility's rate applied to the additional principal) is below the expected return on the next deployment.
Indicative example: original $1.5m facility at 70% LVR on $2.15m property. Property has appreciated to $2.7m over 4 years. Refinance to 70% LVR releases $390,000 of equity. At an 8.0% facility rate, the marginal cost of that equity is $31,200 per year. If the released equity supports a next acquisition expected to produce returns of 12%+ (yield plus growth), the equity release is economically constructive.
Trigger 4 — Covenant pressure on the existing facility
ICR or LVR covenants tightening on an existing facility — through income pressure, rate movement, or revaluation — can trigger a refinance to a lender with more flexible covenants well before the existing facility matures. The decision is not always made on the pricing comparison alone; the cost of a covenant breach (default, additional security demanded, facility recall) can materially exceed the pricing difference between lender lanes.
Sponsors operating close to ICR or LVR covenant thresholds during periods of rate or market stress should map the alternative lender options proactively, before the covenant pressure becomes acute. Once a covenant breach has occurred, the borrower's negotiating position with new lenders is materially weaker than refinancing pre-emptively from a position of compliance.
Trigger 5 — Lender lane pivot (non-bank to bank)
The most economically valuable single refinance in commercial property finance is the move from non-bank acquisition debt to bank Full Doc once the asset and sponsor profile have seasoned to bank policy. The pricing compression is typically 150–300 bps. On a $2m facility, this is $30,000–$60,000 per year of saving across the life of the new facility — comfortably one of the highest-return decisions in commercial property finance.
The lane pivot becomes available when three conditions are met: the asset has stabilised (tenanted, long WALE, 6+ months of demonstrated rental performance), the borrower's documentation profile meets Full Doc requirements (current tax returns, clean ATO, accountant-prepared financials), and the LVR sits within bank policy ceilings (typically 65–70% on tenanted commercial). When all three are present, the bank refinance is generally the right move regardless of how much time remains on the existing non-bank facility.
Plan the lane pivot at acquisition
Sophisticated sponsors structure their original non-bank acquisition facility with the bank refinance exit explicitly in mind — choosing facility terms (typically 18–36 months) that align with expected stabilisation timeline, avoiding break costs that compromise refinance economics, and building reporting discipline during the acquisition phase that produces the documentation set the next lender requires.
Refinance economics — the cost-benefit calculation
A disciplined refinance decision uses a simple economic framework: identify the pricing improvement (annual), identify the one-off transaction costs (establishment, legal, valuation, break), calculate the payback period, then assess the strategic benefit beyond pure pricing.
| Cost / benefit line | Typical range |
|---|---|
| Pricing improvement (annual saving) | Variable — typically $5,000–$60,000 on standard facility sizes |
| Establishment fee on new facility | 0.25–1.50% of facility ($5,000–$30,000+) |
| Legal documentation (new facility) | $3,000–$15,000+ |
| Valuation cost | $2,500–$15,000+ |
| Break cost on existing facility (if fixed) | 0.5–1.5% of remaining principal ($10,000–$30,000) |
| Discharge cost on existing facility | $300–$1,500 |
| Payback period (years) | Typically 1–3 years on economic refinance |